Tesla’s Elon Musk Facing New Challenges After Jury Acquittal

Tesla CEO Elon Musk scores a major legal victory in a court fight that could have threatened his grip on the electric-vehicle maker, which continues to revolutionize the automobile business.

A federal court jury in San Francisco handed down a decision clearing Musk of complaints he deliberately misled and damaged investors and Tesla shareholders in 2018 when he tweeted that he had lined up the financing, some $420 million, necessary to take Tesla private.

Musk, who was forced to testify under oath during the trial, says the tweet was not a serious proposal or one that any investor should have taken at face value. Musk’s lawyers also noted, given the Tesla CEO’s record of success, he could have lined up the financing to take Tesla private if the proposal involved something more than thinking out loud via Twitter.

Deals turning a sizable enterprise such as Tesla from a public into a private company owned by a small group of investors often take months to complete while all sides scrutinize future prospects and financing.

It appears the jurors, given the complexity of a potential deal involving Tesla, thought the tweet from Musk did not actually constitute a serious business proposal.

Musk tweeted afterward: “Thank goodness, the wisdom of the people has prevailed! I am deeply appreciative of the jury’s unanimous finding of innocence in the Tesla 420 take-private case.”

Tesla and its mercurial CEO still face some major legal challenges. The most serious at this point involves challenges to claims involving Full Self Driving (FSD) (pictured, below), which Musk has described as the first system for autonomous driving – with the caveat the driver must remain alert to potential road hazards. Regulators, joined by lawyers for plaintiffs suing Tesla, argue the system does not work anywhere near as well as Musk maintains.

Tesla FSD (getty)

Musk continues to defy the risks, which include potential recalls and adverse verdicts that could wind up costing Tesla millions, by promoting FSD.

However, the courtroom victory in San Francisco suggests Musk is managing to slow or halt the slide in Tesla’s fortunes, which began with what many describe as his ill-advised personal acquisition of Twitter. The acquisition places Musk at the center of a continuing political controversy, which contributed to a decline in Tesla share values of more than 60% through the closing months 2022.

Musk, though, appears to have halted the slide with some bold moves, starting with cutting the price of Tesla’s most popular models by as much as 20%, pressuring EV-market rivals such as General Motors and Ford to do the same. Ford, for example, despite reporting a net loss of $2 billion in 2022, says it plans to reduce the price of its most popular EV model, the Mustang Mach-E.

Musk acknowledges the price cuts will put pressure on Tesla’s margins but notes the company is sitting on more than $20 billion in cash reserves and is pushing ahead with plans for a $3.8 billion expansion of its gigafactory outside Reno, NV. The batteries made there will be used to power a new semi-truck Tesla is preparing to bring to market in a direct challenge to EV rival Nikola, as well as more established truck builders such as Daimler and Volvo.

Additionally, Tesla is scouting for a new gigafactory site in Mexico. The Mexican location would allow Tesla to claim U.S. tax credits available to manufacturers of electric vehicles and EV batteries under the Inflation Reduction Act.

Tesla, and Musk as CEO, still face major challenges, however. Tesla’s new plant in Austin, TX, is not anywhere near full utilization, and the oft-delayed Cybertruck may not be ready for delivery to customers until early 2024.