Tesla stock is looking to advance once again as Tesla CEO Elon Musk testifies in a court case that will decide whether his 2018 tweets about taking Tesla private cost investors billions of dollars.
The securities-fraud lawsuit drama is playing out in a San Francisco courtroom and is scheduled to run through Feb. 20. The class-action case revolves largely around an Aug. 7, 2018 tweet by Musk.
"Am considering taking Tesla private at $420. Funding secured," Musk wrote on Twitter.
Tesla shares had opened that day at 341, jumping to 387 during the session. However, no such deal ever materialized. A Tesla stock investor, Glen Littleton, has sued the EV company. The lawsuit alleges Musk's tweets were false and cost investors billions by manipulating big swings in Tesla stock, options and bonds.
Musk on Monday continued to testify in the case after taking the stand for about 30 minutes on Friday. Attorneys for both Tesla and the plaintiffs had made opening arguments earlier in the week on whether Musk's tweet damaged shareholders.
Tesla stock advanced 7.7% to 143.75 Monday during market trade. The stock had shot up 4.9% Friday. TSLA shares had dropped 1.3% to 127.10 Thursday, the second straight session of losses after shares reversed opening gains Wednesday and edged down 2% to 128.78.
What Investors Should Know About Tesla Lawsuit
Musk had already said he truly was considering taking Tesla private. He thought he had the support of Saudi Arabia's sovereign-wealth fund, the public investment fund, to do so, according to court documents.
On Monday, the Tesla CEO reiterated these claims.
"My understanding was that they would proceed with the deal," Musk told the court Monday.
Musk also said the 420 Tesla stock price was not a reference to marijuana culture. He said he landed on the price as a 20% premium share price at the time.
On the stand Friday, Musk said it's unclear how Tesla stock responds to what he tweets.
"There have been many cases where I thought that if I were to tweet something, the stock price would go down," Musk told the court Friday.
"For example, at one point I tweeted that I thought that, in my opinion, the stock price was too high," he said, according to news reports. "And it went went higher, which was, which is, you know, counterintuitive."
"Just because I tweet something does not mean people believe it or will act accordingly," he added, according to Reuters.
The Tesla CEO also weighed in on short sellers. Musk alleged that short sellers, who take profits when share prices fall, plant stories in the media to "get the stock to go down."
"A bunch of sharks on Wall Street wanted Tesla to die, very badly," Musk said.
"I believe short selling should be made illegal," he added.
Musk is expected to continue his testimony Monday.
Opening Statements
U.S. District Judge Edward Chen, who is overseeing the San Francisco jury trial, has already ruled in April, 2022, that Musk's tweets about taking Tesla private were inaccurate and reckless.
The Wall Street Journal reported the Tesla case is odd because securities-fraud cases are typically resolved before ever reaching the trial stage. Tesla and Musk could face an "an uphill battle" in light of the judge's pretrial decision about the veracity of Musk's statements, according to the Wall Street Journal.
Musk and Tesla both agreed in 2018 to pay $20 million to settle civil charges brought by the Securities and Exchange Commission (SEC) over the same tweets that are the center of the current lawsuit.
Lawyers for the plaintiffs argued Wednesday that "millions of dollars were lost" when Musk's "lies were exposes," according to Reuters.
A jury of nine will decide if the tweets manipulated Tesla's share price by playing up the status of funding for the deal.
Tesla Stock
TSLA shares seem mostly unperturbed by the Tesla lawsuit so far. Tesla stock surged Monday and Friday after two sessions of losses. Tesla stock slipped after a strong start Wednesday, hitting resistance at a key level. However, TSLA shares have been rebounding from a Jan. 6 low of 101.81.
Tesla stock has moved slightly above technical support at its 21-day moving average, but remains well below the 50-day and especially the 200-day lines. A number of analysts have also weighed in on Tesla stock, cutting price targets.
Tesla is due to report fourth-quarter earnings on Jan. 25. Tesla China EV registrations bounced in the latest week following recent big price cuts there.
The most recent registration numbers appear to reflects some benefit from Tesla's Jan. 6 decision to cut prices in China. Tesla slashed prices for the Model 3 and Y in China, with the base Model 3 cut more than 13% to $33,570. Local media reports in China suggested Tesla had received 30,000 orders within three days of the announced cuts, according to CnEVPost.
Tesla has also announced big price cuts in the U.S. and Europe. This will make more models eligible for tax incentives of $7,500 under the Inflation Reduction Act.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
