Elon Musk’s Tesla tweet test dives into investor damage

Elon Musk's Tesla tweet test dives into investor damage

Elon Musk leaves the Phillip Burton Federal Building and United States Courthouse in San Francisco, Tuesday, January 24, 2023. canceled an acquisition the billionaire defiantly asserted on Tuesday that he has can be done if desired. Credit: AP Photo / Benjamin Fanjoy

A tweet by Elon Musk claiming he had enough money to take Tesla private in 2018 caused billions of dollars in losses to investors after the deal collapsed, according to estimates presented on Wednesday. Three at a trial examined the negligent handling of the proposed acquisition.

The staggering estimates released by two experts hired by attorneys representing Tesla shareholders underscore the challenges the nine-person jury faces as the three-week trial comes to an end. this week. US District Judge Edward Chen is expected to turn the case over to a grand jury on Friday.

Depending on the ruling, Musk and the electric car maker he runs could face more financial damage because of his unpredictable behavior on the Twitter platform he currently owns. Without admitting any wrongdoing, Musk and Tesla reached a $40 million settlement with securities regulators following Musk’s troubling tweets in August 2018.

In this class action lawsuit on behalf of Tesla shareholders, jurors must first determine whether two tweets Musk abruptly posted on August 7, 2018 led Tesla investors in the wrong direction. are not. If the jury decides to hold Musk responsible for tweets that Chen has deemed untrue, they will face an even more formidable task – trying to count Musk – one of the richest person in the world – and how much Tesla should have to pay for misleading tweets.

One of two experts on Tuesday, economist Michael Hartzmark, reviewed a report with terms like “but-for” and “inflationary consequences” that made a case for calculating the damage that suffered by Tesla shareholders over a 10-day period in August 2018 of anywhere from $4 billion to $11 billion, or $22.55 to $66.67 per share Tesla votes at that time.

Another expert, University of Maryland finance professor Steven Heston, reviewed an even denser report analyzing the impact of Musk’s tweets on more than 2,000 Tesla stock options. is based on a formula known as the Black-Scholes model that is widely used by companies for pricing. executive compensation package.

When pressed by a lawyer for Musk about the reliability of his model, Heston admitted: “All models deviate from reality, which is why they are models.”

Heston, who said he was paid $300,000 to $350,000 for his work on the case, declined to try to give a specific estimate of investor losses, saying it was the job of the investors. jurors.

The crux of the case revolved around an August 7, 2018 tweet in which Musk stated “guarantee funding” ” to take Tesla private. Musk abruptly tweeted minutes before boarding a private jet after being informed that the Financial Times was about to publish a story that Saudi Arabia’s Public Investment Fund spent about $2 billion buying a 5% stake in Tesla to diversify its interests beyond oil, according to his testimony.

Amid widespread confusion over whether Musk’s Twitter account was hacked or he was joking, hours later Musk followed up with another tweet suggests an impending deal.

Transparent about eight hours of sworn testimonyMusk has repeatedly asserted that he is in the best interests of shareholders and believes he has a funding commitment from the Saudi fund, which was withdrawn following the tweet “funding” guaranteed” by him. Musk also testified that he could still make an acquisition by raising money from other investors and selling some of his stock in SpaceX, a rocket ship maker he founded.

After consulting with Tesla’s major shareholders, Musk decided the electric car company should continue to be publicly traded — a decision that has benefited him and other investors. Tesla shares are now worth eight times what they were at the time of Musk’s acquisition tweetafter adjusting for the two stock splits that have occurred since then.

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