Tesla stock (NYSE: TSLA) is trading higher in post markets after the company’s flamboyant CEO Elon Musk won the class action lawsuit that a group of stockholders had filed over his controversial 2018 tweet about taking the company private.
For the uninitiated, in 2018, Musk tweeted that he is considering taking Tesla private at $420 per share and has also “secured funding.” That price is not comparable to the current price as the company has split its shares twice since then.
The funding wasn’t exactly “secured” even as Musk said that he believed that Saudi Arabia’s PIF (public investment fund) had in principle agreed to fund the transaction. Later the billionaire testified that he could have even sold his stake in SpaceX to fund the transaction.
After that tweet, Musk paid a $20 million fine to the SEC and agreed to step down as the company’s chairman. Tesla too paid a fine of a similar quantum. As part of the agreement, Musk was also supposed to be careful about tweeting price-sensitive information.
Coming back to the lawsuit, some stockholders alleged that they suffered massive losses as Tesla stock whipsawed after Musk’s tweet. A nine-member jury meanwhile yesterday ruled in Musk’s favor in a span of two hours.
After the verdict, Musk hailed the decision on Twitter and said, “Thank goodness, the wisdom of the people has prevailed!” The billionaire acquired Twitter in 2022 and has since been trying to “fix” the social media platform.
‘Teflon’ Musk Wins Yet Another Legal Battle
Musk seldom shies away from controversies and has faced many legal battles over the last few years. However, many label him as “Teflon” Musk as he has prevailed in the legal battles.
He faced a suit over Tesla’s acquisition of Solar City but won the legal battle. British caver Vernon Unsworth also filed a defamation case against Musk when he called him a “pedo guy.” The jury eventually decided that Musk did not defame Unsworth.
Twitter also sued Musk when he backed out of the acquisition deal. It looked like a tough legal battle for Musk and most legal experts believed he stood little chance in the lawsuit. Musk agreed to buy the company at the original terms and settled the case.
His Twitter acquisition meanwhile worked to the nemesis of Tesla stockholders and the stock plunged after Musk took the company private. Tesla stock fell to nearly $100 on the first trading day of 2023 but is now approaching $200. Cathie Wood who bought the dip in Tesla stock sees it rising way above the current price levels.
Tesla Stock Has Almost Doubled from the Lows
Tesla stock has almost doubled from its lows and the momentum continued after the company posted better-than-expected earnings for the fourth quarter of 2022.
Tesla managed to beat both topline and bottomline estimates in the fourth quarter of 2022. Musk also sounded upbeat on the demand for TSLA cars and said that so far in January the order rate is twice that of the production run rate.
Meanwhile, many observers believe that after the jury decision on his 2018 tweet, Musk might continue to push the limits as he has done in the past. Minor Myers, a professor of corporate law at the University of Connecticut said that Musk might “double down” on his antics after the verdict. Myers added, “This is only going to embolden him to act as he sees fit.”
Karen Woody, an associate professor at Washington and Lee University School of Law was shocked at the verdict and said that after the verdict “I expect Elon is going to write anything he wants.”
Legal Battles Are Far from Over for Musk
Meanwhile, Musk’s legal problems are far from over. Bloomberg reported that the US SEC is investigating Musk for the company’s self-driving claims.
Bloomberg cited a person who has knowledge about the matter and reported that the SEC is probing whether Musk made inappropriate forward-looking statements about the technology. It is however not clear which of Musk’s statements the SEC is investigating.
The US NHTSA (National Highway Traffic Safety Administration) is also separately investigating Tesla Autopilot after multiple crashes involving the software. The California DMV (Department of Motor Vehicle) also accused the Elon Musk-run company of using deceptive practices to market the FSD (full-self driving).
Last year, former US presidential candidate Ralph Nader called upon the NHTSA to issue a recall for Tesla’s FSD.
Automotive companies see autonomous driving as a long-term growth driver. NIO has partnered with Tencent for self-driving technology. Recently, Baillie Gifford also increased his stake in NIO. Many analysts see NIO as a worthy competitor to Tesla. There is a guide on buying NIO stock.
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