NOTABLE CASES

Tesla Settles with the SEC for $40 Million; Securities Class Action Case Proceeds

POSTED DEC 13 2018

SETTLEMENT AMOUNT

$40 Million

ADDITIONAL TERMS

  • Elon Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
  • Tesla will appoint a total of two new independent directors to its Board;
  • Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
  • Musk and Tesla will each pay a separate $20 million penalty; the $40 million in penalties will be distributed to harmed investors under a court-approved process.

SETTLEMENT DATE

September 29, 2018

CLASS DEFINITION

On behalf of the shareholders of Tesla, Inc. (“Tesla” or the “Company”)

CASE SUMMARY

According to the Securities and Exchange Commission’s (“SEC”) complaint against Defendant Elon Musk (“Musk”), he tweeted on August 7, 2018 that he could take Tesla private at $420 per share – a substantial premium to its trading price at the time – that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The Complaint alleges that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

According to the SEC’s complaint against Tesla, despite notifying the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musk’s tweets, Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.

CASE STATUS

Active

CLASS DEFINITION

On behalf of…
(a) all persons who purchased or sold Tesla, Inc. (“Tesla”) securities from August 7, 2018 through August 17, 2018;
(b) all persons and entities who had open short positions or put options for Tesla as of August 7, 2018 or August 8, 2018

COURT

USDC – California (Northern)

LEAD COUNSEL (PLAINTIFF)

Levi & Korsinsky

CASE SUMMARY

The Complaint alleges that during the Class Period, Defendants: (1) engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; (2) made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (3) employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Tesla’s securities; and (iii) cause Plaintiff and other members of the Class to purchase Tesla securities at artificially inflated prices.

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