Tesla investors are set to receive an average of around $12,000 each as compensation for the losses they suffered following Elon Musk’s infamous tweet in 2018. The tweet claimed that Musk had “funding secured” to take Tesla private at $420 per share, but this turned out to be false.
The US Securities and Exchange Commission (SEC) has proposed to pay the investors the $40 million, plus interest, that Musk and Tesla agreed to as civil penalties to settle a lawsuit brought by the regulator. However, this amount is only slightly more than half of the estimated $80 million that the SEC believes the investors lost due to the stock’s fluctuations after the tweet. It is also significantly less than the $12 billion in losses calculated by an expert witness in a separate class action trial earlier this year.
In a court filing, the SEC has requested final approval of the plan, which would see a total of 3,350 claims paid out from the settlement fund. On average, each investor would receive just under $12,400. The judge overseeing the case has stated that he will approve the plan on September 1, provided there are no objections from Tesla or Musk.
The reason for the vast difference in estimated losses, ranging from $80 million to $12 billion, is not entirely clear. The expert witness’s calculation appears to include losses suffered by all Tesla investors over a period of 10 days following the tweet. However, the investors involved in the class action trial lost their case in February when the jury cleared Musk of the accusation that he defrauded them with his tweet. It is worth noting that very few corporate securities fraud claims actually go to trial, with the majority either being dismissed or settled.
Despite their initial defeat, the investors in the class action case are appealing the decision. As part of the 2018 settlement with the SEC, Musk and Tesla agreed to pay $20 million each in civil penalties. Additionally, Musk’s Twitter posts related to the company would be subject to screening by a company lawyer.
In conclusion, Tesla investors are set to receive compensation for their losses resulting from Elon Musk’s misleading tweet in 2018. While the amount they will receive is significantly less than the estimated losses, it represents a resolution to the lawsuit brought against Musk and Tesla by the SEC. The investors involved in the class action trial are appealing the jury’s decision, and the final approval of the compensation plan is pending.