In what is as far as I know the largest shareholder derivative lawsuit settlement ever as measured by dollar value, the defendant board members in the Tesla Board compensation derivative suit have agreed to settle the case for a combination of payments and transfers with a total value of $735 million. The agreement settles a Delaware Chancery Court lawsuit that a public pension fund shareholder filed against the board in June 2020 alleging that the since at least 2017 the board had received “unfair and excessive” compensation. The settlement is subject to court approval. A copy of the parties’ stipulation of settlement in the case, filed with the court on July 14, 2023, can be found here.Continue Reading Tesla Board Compensation Derivative Suit Settles for $735 Million
In the following guest post, Jeff Lubitz, Managing Director, ISS Securities Class Action Services, and Jarett Sena, Director of Litigation Analysis, ISS Securities Class Action Services, take a look at the recent jury verdict in the securities class action lawsuit investors filed against Tesla CEO Elon Musk about his infamous “take private” tweet. I would like to thank Jeff and Jarett for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Jeff and Jarett’s guest post.Continue Reading Guest Post: Musk & Tesla Win Rare Securities Class Action Trial
As I have noted before, Elon Musk is a reliable source of interesting blog fodder. His hyperkinetic fracases are so numerous that at times it is easy to lose track of the many controversies in which he is involved. Amidst all of the hoopla about his current bid to acquire Twitter, it was easy to overlook the fact that he remained mired in ongoing litigation relating Tesla’s 2016 acquisition of SolarCity. As the heart of the dispute was the fact that Musk served both as Chairman of SolarCity and as an executive of and as the largest shareholder of Tesla at the time.
The dispute went to a ten-day bench trial in 2021, and on April 27, 2022, Delaware Vice Chancellor Joseph R. Slights III issued a lengthy opinion ruling in Musk’s favor on all issues. A copy of the opinion can be found here. As discussed below, the sprawling, 132-page opinion contains a number of interesting observations and insights and also has important implications.
Continue Reading Elon Musk Prevails in Trial Over Tesla’s Acquisition of SolarCity
The hard part about maintaining a blog is finding interesting topics. It isn’t always easy coming up with things I want to write about. But when all else fails, I can always count on Elon Musk to come up with something. At regular intervals, Musk is out there saying and doing things that are not only interesting and provocative but that are solidly blogworthy. In the last few days, Musk has been at it again, not only making himself the largest shareholder of the social media company Twitter and thereby putting himself on the front pages of the business pages, but, as discussed below, drawing a securities class action lawsuit, as well.
Continue Reading Musk’s Twitter Play Draws Securities Suit
As I have noted in prior posts (most recently here), plaintiffs’ lawyers recently have attempted to rely on statements in social media posts as the basis on which to assert liability under the securities laws. In the following guest post, Nessim Mezrahi considers whether statements in posts on Twitter can support liability for securities law violations. Mezrahi is co-founder and CEO of SAR, a securities class action data analytics and software company. A version of this article previously was published on Law360. I would like to thank Nessim for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.
Continue Reading Guest Post: Why Tweets May Not Validate Securities Class Action Liability
Readers know that I have been following the SEC enforcement action and the securities class action litigation arising from Tesla CEO Elon Musk’s infamous “take private” tweets. I recently noted that the court in the securities suit about the tweets ruled that the case can go forward. I am sure I am not the only one who has wondered while thinking about these events what kind of D&O insurance Tesla carries. While the question of what kind and amount of D&O insurance might be applicable to the pending claims is interesting, what may be even more interesting is that, according to a recent SEC filing, Tesla recently decided to forego D&O insurance for the current period based on an undertaking by Musk to provide the company and its board with equivalent “coverage,” as discussed below.
Continue Reading In Lieu of D&O Insurance, Musk Agrees to Provide Tesla with “Coverage”
In a now infamous August 7, 2018 post on his Twitter account, Tesla CEO Elon Musk stated that he was “considering taking Tesla private at $420. Funding secured.” This post and several subsequent messages ultimately were the subject of an SEC enforcement proceeding (later settled) as well as several securities class action lawsuits (later consolidated). On April 15, 2020, Northern District of California Edward Chen denied the defendants’ motion to dismiss the consolidated securities lawsuit, finding that the “take private” Tweet and other messages were false and misleading. Judge Chen’s opinion is of interest because of the high-profile nature of the allegations, but also for what it says about corporate securities liability exposure for executives’ social media statements. Judge Chen’s opinion can be found here.
Continue Reading Musk’s “Take Private” Tweets Held Actionable
As I detailed in a post at the time (here), on Thursday last week, the SEC filed a securities fraud enforcement action against Tesla Chairman and CEO Elon Musk in connection with his now infamous tweets, in which he said he had “secured” funding to take the company private at a substantial premium over the company’s then-current share price. On Saturday, September 29, 2018, the SEC announced in a press release (here) that it had reached a settlement of the action with Musk, as well as in a separate action against Tesla filed simultaneously with the settlement. In the following guest post, John Reed Stark, the President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement, takes a look at the SEC’s enforcement actions and settlements with Musk and Tesla and provides his insight about what these developments may signify as far as the SEC’s enforcement posture regarding communications on the Internet. A version of this article originally appeared on the Securities Docket. I would like to thank John for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is John’s article.
Continue Reading Guest Post: The SEC/Musk/Tesla Settlement: The Dawning of a New Era of SEC Internet Enforcement
Elon Musk’s August 7, 2018 Tweets, in which he had “secured” funding to take Tesla private at a substantial premium over the then-current share price, have already produced a storm of controversy and a series of securities class action lawsuits against him and the company. The Tesla CEO’s now-infamous Tweets have now also led to a SEC enforcement action against him, in which the agency alleges that Musk’s statements in the Tweets were “false and/or misleading” because “he did not have an adequate basis in fact for making these assertions.” The agency seeks injunctive relief, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of any public company. The SEC’s complaint against Musk can be found here. The SEC’s September 27, 2018 press release about the enforcement action can be found here.
Continue Reading SEC Files Securities Fraud Suit Against Elon Musk Over Take-Private Tweets
I have long thought that it was only a matter of time before somebody filed a securities class action lawsuit based on disclosures made through social media. I knew we were going to see that lawsuit someday or other. Well, the day has arrived. On Friday, August 10, 2018, two Tesla investors each filed separate securities class action lawsuits against Tesla, Inc. and its Chairman, CEO, and largest shareholder, Elon Musk, based on Musk’s tweets last Tuesday that he was considering a take-private deal for which he had “secured” funding and that only shareholder approval was required for completion of the deal. As discussed below, there are a host of interesting things about the lawsuit and about the surrounding circumstances.
Continue Reading Tesla Investors File Securities Suits Over Elon Musk’s Take-Private Tweets