Elon Musk is having a busy Easter week.
Tesla CEO (TSLA) – Get the Tesla Inc report surprised financial and tech circles by announcing this week that it wanted to buy Twitter (TWTR) – Get the report from Twitter, Inc. after becoming the platform’s largest shareholder in early April with a 9.1% stake.
The world’s richest man has offered $54.20 per share, which values Twitter at $43 billion.
The billionaire is particularly angry at the use of the principles of freedom of expression of the social network which is his main channel of communication. It is notably on Twitter that Musk builds the Musk brand. He has more than 82 million Twitter followers, almost equivalent to the entire population of Germany.
The serial entrepreneur says he wants to make significant changes to Twitter, starting with making its algorithm open source.
TweetGate is back
But Musk is coming up against resistance from Twitter’s board of directors, which on April 15 implemented a “poison pill”, a sort of mechanism that makes it difficult for a shareholder to take control of the group.
In a Ted Talk interview, Musk said he wasn’t sure he could win this battle, but he said he had a plan B without giving details. Press rumors claim that he could invite one or two investment funds or private equity firms to join him in convincing shareholders to force the board of directors to accept his offer.
While waiting for the outcome of this fierce battle, another case comes to catch up with the Tech magnate. This case concerns Tesla and the now infamous tweet sent on August 7, 2018.
That day, Musk wrote that he wanted to take Tesla off the stock exchange at a price of $420 per share. Above all, he added that he had secured the financing of such an operation.
“I’m considering privatizing Tesla at $420. Funding secured,” Musk wrote.
The Securities and Exchange Commission (SEC) opened an investigation that resulted in a settlement in September 2018. Under the settlement, Musk would step down as chairman of Tesla’s board of directors, pay a $20 million fine and Tesla would also pay a $20 million fine. sadness. Tesla also pledged to pre-approve tweets from Musk that would potentially impact the title.
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For shareholders, the case is not closed. Some of them have thus decided to attack Musk in court by regrouping around a collective action. They believe they were wronged by Musk’s tweet and above all they claim that Musk lied by saying that he had the necessary funds to finance the operation.
So they filed a class action lawsuit.
Funding received is not accurate
“Mr. Musk was considering taking Tesla private at $420 a share. Funding was secured. There was investor support. “PIF”) and Tesla’s board of directors, as well as the undisputed fact that there was sufficient funding for a privatization transaction, PIF or otherwise,” the billionaire’s lawyers said in a motion filed with the court. US District Court for the Northern District of California in San Francisco in February.
“I would have to say that originally with Tesla at the time, the funding was actually secured. I want to be clear about that,” Musk himself said on April 14, during an interview with Ted Talk.
“Actually, this may be a good opportunity to clear that up. If funding was indeed secured and, should I say, why don’t I have any respect for the SEC in this situation? And I don’t want to blame any the world to the SEC, but certainly the San Francisco office, because the SEC knew the funding was secured, but they conducted an active public investigation nonetheless.
But according to attorneys for the plaintiff investors, California Judge Edward Chen ruled on the evening of April 15 that Musk’s statements were untrue. The judge found that Musk acted with scienter, meaning he knowingly made false statements about obtaining funding when he tweeted, the lawyers said.
“Nothing will ever change the truth that Elon Musk was considering taking Tesla private and could have been,” Alex Spiro, Musk’s attorney for Quinn Emanuel, replied in an emailed statement. “All that’s left half a decade later are random plaintiffs’ lawyers trying to make money and others trying to keep this truth from coming to light at the expense of free speech. “
Spiro did not dispute the plaintiffs’ statement regarding the judge’s decision.
Trial scheduled for May
The information was revealed as part of a motion by plaintiffs’ attorneys asking the judge to bar Musk from continuing to make statements on the subject beginning April 14 on the Ted Talk. Indeed, the decision is under seal at the request of the parties who are preparing the trial scheduled from May 31, according to the trial.
“Since this is evidence that the defendants considered confidential, the Court has provisionally filed the order under seal while the parties agree on which parts, if any, should remain under seal. We anticipate that the order will be released soon,” attorney Adam Apton of Levi & Korsinsky, who is representing the plaintiffs, said in a statement emailed to TheStreet.
This lawsuit could cost Musk dearly if he loses it.
Bloomberg was the first to report on the judge’s decision.