Elon Musk, the troubled billionaire, is currently in court for a company he didn’t take private while still dealing with the consequences of one he did.
Long before he paid $44 billion for Twitter in October, Elon Musk had his sights set on Tesla, the electric carmaker where he continues to serve as CEO and where he draws the majority of his money and notoriety.
Musk asserted in a tweet on August 7, 2018, that he had secured the finance to pay for a $72 billion acquisition of Tesla, which he then emphasized in a subsequent statement that suggested a transaction was close at hand.
However, the buyout never happened, and Musk will now have to defend his actions in a federal court in San Francisco while being sworn in.
The trial was sparked by a class-action lawsuit on behalf of investors who held Tesla stock for a 10-day period in August 2018. Jury selection for the trial will begin on Tuesday.
A week later, as it became clear that Musk lacked the financing for a buyout after all, the spike in Tesla’s stock price that had been sparked by his tweets at the time unexpectedly came to an end.
Because of it, he abandoned his proposal to take the automobile private, which led to a $40 million settlement with American securities regulators and his removal as the chairman of the business.
Tesla’s present owners are concerned that Musk has been spending less time managing the automaker at a time of escalating competition because of his leadership of Twitter, where he has decimated the staff and alienated consumers and advertisers.
These worries influenced Tesla’s stock to decline by 65% in 2018, wiping out more than $700 billion in shareholder wealth, a much larger loss than the $14 billion swing in fortune between the company’s high and low stock prices during the period covered by the class-action lawsuit, which ran from August 7–17, 2018.
The basis of the complaint is the idea that Tesla’s shares wouldn’t have fluctuated so much if Musk hadn’t raised the possibility of buying the business for $420 per share. Since then, Tesla’s stock has split twice, making the $420 price now only worth $28 on an adjusted basis. The stock fell from its split-adjusted top of $414.50 in November 2021 to end last week at $122.40.
After Musk abandoned the idea of a Tesla takeover, the business addressed a production issue, leading to a sharp increase in car sales that sent its stock soaring and made Musk the richest man in the world until he acquired Twitter. Musk was knocked off the wealth list’s top spot when the stock market reacted negatively to his handling of Twitter.
Given that the witness list includes some of Tesla’s current and former top executives and board members, including luminaries such as Larry Ellison, Oracle co-founder, and James Murdoch, the son of media mogul Rupert Murdoch, the trial is likely to provide insights into Musk’s management style.
