Musk to face trial over tweet

TESLA chief executive Elon Musk’s famous “420” tweet continues to haunt him.

Musk and Tesla settled fraud charges in 2018 with the Securities and Exchange Commission after Musk tweeted that he had “funding secured” to take Tesla private at $420 a share. He had secured no such funding. Musk and Tesla each paid $20 million and Musk gave up his Tesla chairmanship for three years.

Now, a civil class action shareholder lawsuit will go forward against Musk and the company on the same issue. Tesla had filed a motion to dismiss the case, but a federal judge denied it on Wednesday.

The suit says short sellers – who make money when a stock price falls – and long investors lost huge amounts of money as the stock skyrocketed on the funding-secured claim, then crashed when Musk couldn’t verify the tweet was true.

In its motion, Tesla said the case should be tossed because the plaintiffs didn’t prove the tweet was false and misleading, and that Tesla itself should not be part of the suit because Musk tweeted as a “potential bidder”, not as Tesla’s chief executive.

In a ruling, US District Judge Edward M Chen in San Francisco wrote: “The rise and fall of Tesla’s stock prices corroborated with the timing of the alleged false and misleading statements, all of which occurred within a less-than-two-week period, and which suggests Mr Musk’s false statements were the proximate cause.”

On whether Musk’s tweet represented Tesla, Chen wrote Musk “was in fact speaking as the CEO of Tesla within the scope of his authority”, and noted that in November 2013, Tesla formally notified investors it would use Musk’s Twitter account to convey “additional information about the company to investors”.

When the trial will begin is uncertain given the Covid-19 pandemic.

Tesla declined to comment.