Elon Musk, the founder, CEO, and Chairman of Tesla, Inc., recently faced a shareholder lawsuit in the Delaware Court of Chancery over a series of tweets he made in August 2018. In the tweets, Musk claimed that he had “secured funding” to take Tesla private at $420 per share, an assertion that was later deemed to be false.
At the trial, Musk’s defense was that the “funding secured” language was only meant to be a shorthand way of expressing his optimism and confidence that a deal to take Tesla private could be finalized. Musk further argued that, at the time of the tweet, he had ongoing discussions with several potential investors and he believed that financing for a private buyout would be forthcoming.
To support his defense, Musk provided emails, texts, and other documents that demonstrated his efforts to secure financing for the potential buyout. He also called witnesses to testify that he was in the process of negotiating a deal with Saudi Arabia’s sovereign wealth fund and other investors. Musk also called experts to testify that, due to the nature of the discussions he was having with potential investors, it was reasonable to believe that funding was secured.
Ultimately, the court sided with Musk and dismissed the case. The court found that Musk’s tweets were “forward-looking statements” and, as such, were covered by the safe harbor provisions of the Private Securities Litigation Reform Act. The court also found that there was sufficient evidence to demonstrate that Musk believed that financing for a private buyout was secured.
In the end, Musk’s defense was successful in demonstrating that his “funding secured” tweets were not intentionally false or misleading. Although the case has been dismissed, it remains to be seen if Musk will face any repercussions from the Securities and Exchange Commission or other regulatory bodies.
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