A US judge has determined that Elon Musk’s 2018 tweets that funding had been secured to take electric car maker Tesla private was inaccurate and reckless, saying “there was nothing concrete” about financing from Saudi Arabia’s sovereign wealth fund at that time.
San Francisco-based District Judge Edward Chen’s pre-trial decision represented a major victory for investors in a lawsuit accusing the world’s richest person of inflating stock prices by making false and misleading statements, causing billions of dollars in damages.
Chen granted the shareholders summary judgment on the issue of whether Musk knowingly made false statements but declined to grant them summary judgment on the question of whether these statements actually impacted Tesla’s share prices.
In 2018, Musk met with representatives of Saudi Arabia’s Public Investment Fund and had a discussion about taking Tesla private, but evidence showed that “there was nothing concrete about funding coming from the PIF,” the judge wrote.
“Rather, the discussions between Tesla and the PIF were clearly at the preliminary stage,” Chen said.
“No reasonable jury could find that Mr. Musk did not act recklessly given his clear knowledge of the discussions, ”the judge added.
Chen said details such as the total amount of funding needed to take Tesla private or the price to be paid for Tesla stock were not discussed.
The summary judgment, made on April 1, was sealed for more than a month before it was made publicly available on Tuesday.
“It is hugely significant,” shareholder attorney Nicholas Porritt, a partner at Levi & Korsinsky LLP told Acesparks.
Porritt said it is rare that a judge decides that a defendant knowingly made false statements in summary judgment before a jury trial begins. The remaining issue is what damages the intentionally false statement has caused to shareholders, Porritt said.
Musk’s lawyer, who has filed motions to undo the court decision, did not immediately respond to a request for comment. Musk said last month that funding was actually secured to take Tesla private in 2018.
Chen’s ruling was in line with a complaint from the Securities and Exchange Commission. The securities regulator in 2018 sued Musk for fraud relating to the tweets. Musk then settled with the SEC, stepping down as Tesla chairman, paying fines and agreeing to have a lawyer approve some of his tweets before posting them.