For damages they sustained as a result of Elon Musk’s well-known 2018 tweet that he had “funding secured” to take the automaker public at $420 per share — but didn’t — a group of Tesla Inc. customers stands to recover a median of almost $12,000 per person.
The US Securities and Change Fee intends to reimburse the purchasers for the $40 million plus interest that Tesla’s CEO and the company agreed to pay as civil penalties to resolve a dispute brought by the regulator.
That’s just a little bit more than half of the $80 million the SEC estimates they lost due to the stock’s swings after the tweet, and it’s a tiny fraction of the $12 billion in losses a witness for a group of Tesla customers estimated earlier this year in a different class action lawsuit.
In a court filing on Wednesday night, the SEC asked for a decision for final approval of the plan.
If the proposal is approved, in accordance with the submission, a total of 3,350 claims would be paid out of the fund arrangement from the settlement. That amounts to an average investment of just under $12,400 per person.
The judge announced on Thursday that, barring objections from Tesla or Musk, the richest man in the world, he will log out of the plan on September 1.
What causes the enormous gap between the anticipated losses of $80 million and $12 billion? It’s not entirely clear, but the expert’s sum was applied to losses by all Tesla customers over a 10-day period following the tweet from August 7, 2018.
The SEC’s figure only pertains to Tesla common stock, spans just over 27 hours following the tweet, and excludes trades in options and by-products. And not every qualified investor made a claim.
The consumers in the class action case lost at trial in February when the jury cleared Musk of their claim that he had misled them with the tweet in under two hours. It was one of the few corporate securities fraud cases that went to trial. The vast majority are dismissed or resolved.
The purchasers are fascinating.
Musk and Tesla each agreed to pay $20 million in civil fines as part of the 2018 SEC settlement, and the CEO’s company-related Twitter statements could be reviewed by a business attorney.
Musk and Tesla paid the money, but Musk grew irritated with the SEC’s monitoring of his social media posts and claimed the settlement infringed his right to free speech. In Might, a federal appeals court dismissed these defenses and ruled against Musk’s efforts to overturn the agreement.
SEC v. Musk, 18-cv-08865, US District Court docket, Southern District of New York (Manhattan), is the case under regulation.
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