`Case 3:18-cv-04865-EMC Document 184 Filed 01/16/19 Page 1 of 58
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`
`LEVI & KORSINSKY, LLP
`Adam M. Apton (SBN 316506)
`Adam C. McCall (SBN 302130)
`44 Montgomery Street, Suite 650
`San Francisco, California 94104
`Tel: (415) 291-2420
`Email: aapton@zlk.com
`Email: amccall@zlk.com
`
`Attorneys for Lead Plaintiff Glen Littleton
`and Lead Counsel for the Class
`
`[Additional counsel on signature blocks]
`
`
`
`IN RE TESLA, INC. SECURITIES
`LITIGATION
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`Case No. 18-cv-04865-EMC
`Hon. Edward M. Chen
`CLASS ACTION
`CONSOLIDATED COMPLAINT FOR
`VIOLATIONS OF THE FEDERAL
`SECURITIES LAWS
`Demand for Jury Trial
`
`Lead Plaintiff Glen Littleton (“Plaintiff”), by and through undersigned counsel, allege the
`following upon information and belief, except as to those allegations concerning Plaintiff, which
`are alleged upon personal knowledge. Plaintiff’s information and belief is based upon, among other
`things, the investigation made by and through Plaintiff’s attorneys, which includes without
`limitation: (a) review and analysis of regulatory filings made by Tesla, Inc. (“Tesla”) with the
`United States Securities and Exchange Commission (“SEC”); (b) review and analysis of press
`releases and media reports issued and disseminated by Tesla; (c) review and analysis of pleadings
`and other papers filed in the civil proceedings brought by the SEC against Tesla and Defendant
`Elon R. Musk (“Musk”) in the United States District Court for the Southern District of New York,
`including the complaints filed and judgments entered therein; and (d) review of other publicly
`available information concerning Tesla.
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`Plaintiff believes that substantial evidentiary support will exist for the allegations set forth
`herein after a reasonable opportunity for discovery.
`I.
`NATURE OF THE CLAIM
`1.
`Plaintiff, on behalf of a class of shareholders who purchased or sold Tesla securities
`from August 7, 2018 to August 17, 2018 (the “Class Period”) and were damaged thereby, brings
`this federal class action lawsuit against Defendants Tesla, Musk, and Tesla’s Board of Directors
`(defined below). As alleged herein, Musk and Tesla violated Section 10(b) of the Securities
`Exchange Act of 1934, 15 U.S.C. §78j, and SEC Rule 10b-5, 17 C.F.R. 240.10b-5. Tesla’s Board
`of Directors violated Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §78t. These
`violations caused Plaintiff and the class billions of dollars of damages for which Defendants should
`be held accountable.
`2.
`Musk co-founded Tesla and, at all relevant times, served as the company’s Chief
`Executive Officer and Chairman. On August 7, 2018, at 12:48 p.m. ET, Musk tweeted the following
`message to over 22 million people: “Am considering taking Tesla private at $420. Funding
`secured.” Musk continued to tweet and make statements about the potential transaction including
`tweeting about three hours later: “Investor support is confirmed. Only reason why this is not certain
`is that it’s contingent on a shareholder vote.” These statements and a later email published on
`August 13, 2018, created the impression to the public that it was virtually certain that Musk could
`take Tesla private at $420 per share, that funding for this multi-billion dollar transaction had been
`secured, and the only remaining contingency was a shareholder vote.
`3.
`In fact, Musk had not even discussed, much less confirmed, key deal terms,
`including price, with any potential investor. There was no funding secured to take Tesla private at
`$420 per share or any other price. Musk had discussed taking Tesla private with Saudi Arabia’s
`sovereign wealth fund (named the “Public Investment Fund”), but those discussions were extremely
`preliminary. They consisted of only exploring how the fund could be involved and did not result in
`any firm decision on whether the fund would increase its existing 5% stake in Tesla.
`4.
`The statements were also false because Musk himself understood there was “a lot of
`uncertainty” surrounding the proposal and there were many contingencies that needed to be satisfied
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`before any transaction could be approved by Tesla stockholders. Musk had not reached any
`agreement as to the price per share, had not determined how the going-private transaction would be
`structured, had not determined whether and to what extent current shareholders would be in favor
`of the transaction or if Tesla’s Board of Directors would even be in favor of having a shareholder
`vote, had not formally retained any advisors, and had not determined whether any regulatory
`approvals would need to be obtained for the transaction. Musk had also not reached any agreement
`concerning a significant contingency raised by the Public Investment Fund—building a Tesla
`production facility in the Middle East.
`5.
`Musk knew of the uncertain and contingent nature of any going-private transaction
`for Tesla as well as the lack of any secured funding at $420 per share or at any other price. Yet
`Musk published his tweets and other statements anyway, disrupting the markets in Tesla securities
`such as stock and stock options, and causing billions of dollars of damage to Tesla investors. Indeed,
`Musk has since admitted in the fraud case brought against him by the SEC that his statements about
`the going-private transaction “were premised on a long series of baseless assumptions and were
`contrary to facts that [he] knew.”
`6.
`On August 17, 2018, The New York Times published an article based on a lengthy
`interview with Musk that reported that the Public Investment Fund had not committed to provide
`any cash, so funding was not “secured.” The New York Times article further disclosed that no one
`had seen or reviewed Musk’s August 7, 2018 tweet before he posted it indicating that no going-
`private transaction was imminent. That day, Tesla’s shares declined by almost 9%, erasing over $5
`billion of Tesla’s market capitalization. For investors that initially believed Musk’s statements and
`purchased shares at artificially inflated prices in hopes that Tesla would ultimately pay $420 per
`share, they sustained millions of dollars in losses.
`7.
`Investors who were “short” Tesla stock (meaning that they were betting the stock
`price would decline) were also damaged. Tesla had over 170 million shares outstanding at or around
`August 7, 2018. The “short interest” at that point in time was 33.8 million, meaning that almost
`20% of Tesla’s shareholders were betting that Tesla’s stock would decline in value. Musk’s tweet,
`which caused the price of Tesla’s shares to increase 11% over the course of the day, resulted in a
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`mark-to-market loss of $1.1 billion for these short investors, many of whom had to purchase Tesla
`shares at inflated prices to cover their positions.
`8.
`Option traders also suffered significant losses. Purchasers and sellers of call and put
`contracts, which are agreements that provide investors with either the right or the obligation to buy
`or sell shares at specific prices within particular periods of time, opened and closed positions at
`artificial prices due to the artificial inflation in Tesla’s stock price and the increased implied
`volatility in Tesla’s stock, resulting in damages to those investors.
`9.
`By misleading investors regarding the proposed going-private transaction and its
`funding, Musk, either intentionally or with deliberate recklessness, harmed virtually every single
`other person and/or entity trading Tesla securities during the Class Period.
`10. Members of Tesla’s Board of Directors also bear responsibility for the losses
`suffered by Tesla investors as a result of Musk and Tesla’s misrepresentations. The Board of
`Directors had responsibility for ensuring Tesla’s public disclosures were truthful and accurate. In
`November 2013, Tesla identified Musk’s Twitter account as an official channel of communication
`for the company. Once that occurred, Tesla’s Board of Directors were duty-bound to oversee the
`accuracy of statements made by Musk on his Twitter account. While Tesla’s board members issued
`press releases regarding the proposed going-private transaction and managed to persuade Musk
`from tweeting about the transaction for some of the Class Period, they did not use this control to
`ensure that the disinformation published by Musk was corrected until after the Class had already
`suffered billions of dollars in losses.
`II.
`JURISDICTION AND VENUE
`11.
`The claims asserted herein arise under and pursuant to: Sections 10(b) of the
`Securities Exchange Act of 1934, 15 U.S.C. §78j, and SEC Rule 10b-5 promulgated thereunder by
`the SEC (17 C.F.R. §240.10b-5); and Section 20(a) of the Securities Exchange Act of 1934, 15
`U.S.C. §78t.
`12.
`This Court has jurisdiction over the subject matter of this action pursuant to
`28 U.S.C. §1331 and Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. §78aa.
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`13.
`Venue is proper in this District pursuant to Section 27 of the Securities Exchange
`Act of 1934, 15 U.S.C. §78aa and 28 U.S.C. §1391(b) because certain of the acts alleged herein,
`including the preparation and dissemination of material false and/or misleading information,
`occurred in this District. Further, Tesla’s principal executive offices are located within this District.
`14.
`In connection with the acts, conduct and other wrongs alleged in this Complaint,
`Defendants, directly and/or indirectly, used the means and instrumentalities of interstate commerce,
`including but not limited to, the United States mail, interstate telephone communications and the
`facilities of the national securities exchange.
`III.
`PARTIES
`15.
`Lead Plaintiff Glen Littleton purchased and sold Tesla common stock and options
`during the Class Period and was damaged thereby. Littleton’s certification evidencing his
`transactions in Tesla’s securities during the Class Period, previously filed with the Court in
`connection with his motion for appointment as lead plaintiff, is incorporated herein by reference
`(ECF No. 42-1).
`16.
`Defendant Tesla is a Delaware corporation with its principal executive offices
`located at 3500 Deer Creek Road, Palo Alto, California 94304. Tesla designs, develops,
`manufactures, and sells electric vehicles and energy generation and storage systems. The
`company’s stock is listed on the NASDAQ Global Select market (“NASDAQ”) under the ticker
`symbol “TSLA.” Other Tesla securities include stock options which are traded and quoted on
`exchanges including: BOX Exchange LLC; Cboe BZX Options Exchange, Inc; Cboe C2 Options
`Exchange, Incorporated; Cboe EDGX Options Exchange, Inc.; Cboe Options Exchange,
`Incorporated; Miami International Securities Exchange, LLC; MIAX PEARL, LLC; Nasdaq BX,
`Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market
`LLC; NYSE American LLC; and NYSE Arca, Inc.
`17.
`Defendant Musk co-founded Tesla in July 2003. In early February 2004, Musk
`became Tesla’s majority shareholder and joined the Board of Directors as its Chairman. By October
`2008, Musk became both the Chief Executive Officer and spokesman of Tesla and has served in
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`that capacity since 2008. Musk was forced to step down as Chairman of Tesla’s Board in October
`2018 in accordance with his settlement with the SEC concerning the statements at issue herein.
`18. Musk created a profile on the social media platform Twitter under the handle
`“@elonmusk” (twitter.com/elonmusk) in June 2009. Since that time, Musk often used Twitter to
`communicate about Tesla’s business.
`19.
`In November 2013, Tesla formally notified investors that it would use Musk’s
`Twitter account as a formal means of communication to convey “additional information” about the
`company to investors. In a current report on Form 8-K dated November 5, 2013, Tesla stated, in
`pertinent part, as follows: “Tesla investors and others should note that we announce material
`information to the public about our company, products and services and other issues through a
`variety of means, including Tesla’s website, press releases, SEC filings, blogs and social media, in
`order to achieve broad, non-exclusionary distribution of information to the public. . . . For additional
`information, please follow Elon Musk’s and Tesla’s Twitter accounts: twitter.com/elonmusk and
`twitter.com/TeslaMotors.”
`20.
`Defendant Brad W. Buss (“Buss”) has served as a director of Tesla’s Board since
`2009. As a member of the Board, Buss acted as a controlling person of Tesla.
`21.
`Defendant Robyn Denholm (“Denholm”) has served as a director of Tesla’s Board
`since 2014 and was appointed to chair the Board on November 7, 2018. As a member of the Board,
`Denholm acted as a controlling person of Tesla.
`22.
`Defendant Ira Ehrenpreis (“Ehrenpreis”) has served as a director of Tesla’s Board
`since 2007. As a member of the Board, Ehrenpreis acted as a controlling person of Tesla.
`23.
`Defendant Antonio J. Gracias (“Gracias”) has served as a director of Tesla’s Board
`since 2007 and has served as Tesla’s Lead Independent Director since 2010. As a member of the
`Board, Gracias acted as a controlling person of Tesla.
`24.
`Defendant James Murdoch (“Murdoch”) has served as a director of Tesla’s Board
`since 2017. As a member of the Board, Murdoch acted as a controlling person of Tesla.
`25.
`Defendant Kimbal Musk has served as a director of Tesla’s Board since 2004. As a
`member of the Board, Kimbal Musk acted as a controlling person of Tesla.
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`26.
`Defendant Linda Johnson Rice (“Rice”) has served as a director of Tesla’s Board
`since 2017. As a member of the Board, Rice acted as a controlling person of Tesla.
`27.
`Defendants Buss, Denholm, Ehrenpreis, Gracias, Murdoch, Kimbal, and Rice are
`collectively referred to as the “Board.”
`IV. CLASS ACTION ALLEGATIONS
`28.
`Plaintiff brings this action on behalf of all individuals and entities who purchased or
`sold Tesla stock, options, and other securities during the Class Period and were damaged thereby,
`excluding Tesla, Musk, the Board, and each Defendant’s immediate family members, legal
`representatives, heirs, successors or assigns, and any entity in which Tesla, Musk, or the Board have
`or had a controlling interest (the “Class”).
`29.
`The Class members are so numerous that joinder of all members is impracticable.
`Throughout the Class Period, Tesla’s securities were actively traded on the NASDAQ. While the
`exact number of Class members is unknown to Plaintiff at this time and can be ascertained only
`through appropriate discovery, Plaintiff believes that there are thousands if not hundreds of
`thousands of Class members. Record owners and other Class members may be identified from
`records maintained by Tesla or its transfer agent and may be notified of the pendency of this action
`by mail, using the form of notice similar to that customarily used in securities class actions.
`30.
`At all relevant times herein, there were over 170 million shares of Tesla’s common
`stock outstanding and hundreds of millions of dollars of other securities traded. Upon information
`and belief, these shares and option contracts were held by thousands of individuals located
`geographically throughout the country and the world. Joinder would be highly impracticable.
`31.
`Plaintiff’s claims are typical of the claims of the Class members as all Class
`members were similarly affected by the Defendants’ wrongful conduct in violation of the federal
`securities laws complained of herein. Plaintiff bought and sold common stock and option contracts
`during the Class Period. The manner in which Plaintiff sustained damages in connection with each
`security that he held was similar, if not identical, to other Class members who purchased or sold
`Tesla securities.
`32.
`Plaintiff has and will continue to fairly and adequately protect the interests of the
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`V.
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`Class members.
`33.
`Plaintiff has retained counsel competent and experienced in class and securities
`litigation.
`34.
`Plaintiff has no interests antagonistic to or in conflict with those of the Class.
`35.
`Common questions of law and fact exist as to all Class members and predominate
`over any questions solely affecting individual Class members. Among the questions of law and fact
`common to the Class are:
`(a)
`whether the federal securities laws were violated by Defendants’ respective
`acts as alleged herein;
`whether Defendants acted knowingly or with deliberate recklessness in
`issuing false and misleading statements concerning a proposed going-private
`transaction and its financing;
`whether the price of Tesla’s securities during the Class Period were affected
`by Defendants’ conduct complained of herein; and
`whether the Class members have sustained damages and, if so, what is the
`proper measure of damages.
`36.
`A class action is superior to all other available methods for the fair and efficient
`adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
`damages suffered by individual Class members may be relatively small, the expense and burden of
`individual litigation make it impossible for Class members to individually redress the wrongs done
`to them.
`37.
`There will be no difficulty in the management of this action as a class action.
`BACKGROUND ALLEGATIONS
`38.
`Tesla designs, develops, manufactures, and sells electric vehicles. These vehicles
`consist primarily of three models: the Model S luxury sedan, the Model X sport utility vehicle, and
`the Model 3 mass market sedan.
`
`(b)
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`(c)
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`(d)
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`39.
`Both the Model S and Model X had experienced production difficulties after being
`introduced in 2012 and 2015, respectively. As the Model 3 vehicle was to be produced in greater
`numbers, analysts and investors closely followed Tesla’s production plans for it.
`40.
`On October 2, 2017, Tesla issued a press release stating that “Model 3 production
`was less than anticipated due to production bottlenecks.” Despite promising to deliver 1,600 Model
`3 vehicles in the third quarter of fiscal 2017, it had produced only 220 of the vehicles. Musk had
`previously promised on February 22, 2017 that Tesla would be producing 5,000 Model 3 vehicles
`per week by the end of 2017.
`41.
`On November 1, 2017, in an “Update Letter” posted to its website, Tesla revealed
`that its manufacturing problems during the third quarter of fiscal 2017 had resulted in heavy
`spending in an effort to increase production. The spending resulted in wider-than-expected losses—
`$2.92 per share compared to the analyst consensus of $2.29 per share—and a sharp decline in the
`price of Tesla’s common stock from $331.53 per share to $321.08 per share.
`42.
`Notwithstanding its production problems, Tesla told shareholders in the November
`1, 2017 “Update Letter” that it expected to achieve a production rate of 5,000 Model 3 vehicles per
`week late in the first quarter of 2018.
`43.
`On January 3, 2018, the Los Angeles Times reported that Tesla’s problems with
`battery production at its “Gigafactory” in Sparks, Nevada (where Tesla produces lithium-ion
`batteries and electric vehicles), were worse than it had acknowledged and likely to cause further
`delays and quality issues for the new Model 3 vehicles. The continued production problems led
`Tesla to revise its previously stated production targets in a press release dated January 3, 2018.
`From 5,000 Model 3 vehicles per week by the end of the first quarter of 2018, Tesla told investors
`that it was aiming for 2,500 Model 3 vehicles per week by the end of March, ramping up to 5,000
`Model 3 vehicles per week by June.
`44.
`On January 25, 2018, investors received additional information about Tesla’s Model
`3 production problems when CNBC reported that Tesla’s Model 3 vehicle production was being
`hampered in part due to the fact that the company was still making its Model 3 vehicle batteries
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`partly by hand and having to “borrow” scores of employees from Panasonic, which is a partner in
`the Gigafactory and supplies lithium-ion battery cells, to help with this manual assembly.
`45.
`Numerous short investors had targeted Tesla by this point in time. For example,
`CNBC reported in its January 25, 2018 article that Stanphyl Capital’s Mark B. Spiegel had taken a
`“significant short position in the company.” Spiegel told CNBC, in pertinent part, that: “While I’ve
`no doubt that Tesla will eventually work out its Model 3 vehicle production problems, the base
`model will cost Tesla at least mid-$40,000s to build. The company will never deliver more than a
`token few for less than the current $49,000 lowest-cost offering. Sales will hugely disappoint
`relative to expectations of over 400,000 a year. And even at those higher prices Tesla will never
`come anywhere close to its promised [profitability].”
`46.
`As of January 31, 2018, the short interest in Tesla stock was approximately 30
`million shares, or about 18% of Tesla’s outstanding shares.
`47.
`On April 3, 2018, Tesla revealed in a press release that instead of producing 2,500
`Model 3 vehicles per week, it was only producing just over 2,000. According to the Wall Street
`Journal in an article published on April 3, 2018, Musk had developed a reputation for setting
`“ambitious deadlines that he fail[ed] to meet on time.”
`48.
`As of April 3, 2018, Tesla’s short interest had grown to almost 32 million shares, or
`19% of the company’s outstanding shares.
`49.
`On April 11, 2018, according to an article published by CNBC titled Tesla is the
`biggest short in the US stock market, the dollar amount of shares shorted on Tesla was $10.7 billion,
`or more than 25% of Tesla’s available stock. Big banks, such as Goldman Sachs, were encouraging
`its clients to sell their Tesla stock on the premise that the company would not be able to meet its
`Model 3 vehicle production targets.
`50. Musk publicly displayed his animosity towards short sellers of Tesla stock. On May
`2, 2018, while participating in a conference call to discuss Tesla’s earnings for the first quarter of
`2018, Musk abruptly dismissed questions from analysts. In response to a question from Sanford
`Bernstein senior analyst Toni Sacconaghi about Tesla’s capital requirements, Musk responded by
`saying “Boring, bonehead questions are not cool, Next?” In response to a question from RBC
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`Capital Markets Joseph Spak about Model 3 vehicle reservations, Musk said, “These questions are
`so dry. They’re killing me.”
`51.
`On May 4, 2018, Musk defended his hostile behavior towards Sacconaghi and Spak,
`tweeting that they were just “two sell-side analysts who were trying to justify their Tesla short
`thesis.”
`52.
`Later on May 4, 2018, Musk tweeted “Oh and uh short burn of the century comin
`soon. Flamethrowers should arrive just in time.” Shortly afterwards on May 4, 2018, Musk stated,
`“Looks like sooner than expected. The sheer magnitude of short carnage will be unreal. If you’re
`short, I suggest tiptoeing quietly to the exit . . . .”
`53.
`On May 7, 2018, Musk bought about $9.85 million worth of Tesla shares in the pre-
`market in a manner designed have the greatest impact on Tesla’s stock price and force a burst of
`short-covering. On May 7, 2018, Tesla’s stock price increased from $297.50 to $302.77.
`54. Musk did this again on June 12, 2018 when he bought about $24.9 million worth of
`Tesla stock to maintain Tesla’s stock price despite announcing that Tesla was cutting 46,000
`employees, about 9% of its workforce.  
`55.
`On June 17, 2018, Musk tweeted that “[the shorts] have about three weeks before
`their short position explodes.”
`56.
`On July 2, 2018 and July 3, 2018, The New York Times and Bloomberg reported that
`Tesla finally met its production target of 5,000 Model 3 vehicles per week during the last seven
`days of June 2018.
`57.
`Despite Tesla’s increased Model 3 vehicle production figures, its stock price fell
`from $342.95 on June 29, 2018 to $310.86 on July 3, 2018. Tesla’s short interest, however, also
`fell by 11% from 39 million shares to 34.6 million shares.
`58.
`On July 22, 2018, the Wall Street Journal published a story focused on Tesla’s
`request to suppliers to refund a portion of its past payments. According to this report, Tesla
`requested its suppliers to refund “a meaningful amount of its payments since 2016” to allow it to
`continue its operations and continue “the long-term growth between” Tesla and its suppliers.
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`Case 3:18-cv-04865-EMC Document 184 Filed 01/16/19 Page 12 of 58
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`Tesla’s requests for refunds from its suppliers raised further questions about its cash position, which
`had dwindled due to Model 3 vehicle production issues.
`59.
`Following the July 22, 2018 Wall Street Journal article, Tesla’s stock price declined
`from $313.58 per share to $303.20 per share.
`60.
`On July 24, 2018, in response to a growing short interest following the Wall Street
`Journal article, Musk contacted the employer of an author of an article published on SeekingAlpha
`and threatened to sue or complain publicly about the articles. The author, who managed a private
`family investment portfolio of approximately $1 billion, had published four articles titled “Just Say
`‘No’ To Tesla’s Misleading Margin Metric,” “As Tesla Breaks Faith With Its Believers, It’s Time
`To Go Short,” “Even With Model 3 Success, Tesla Is Structurally Bankrupt,” and “Tesla Investors
`Swallow The Blue Pill.” Musk threatened that if the author continued to write, he would engage
`counsel and sue. As a result of Musk’s threats, the author immediately stopped writing at
`SeekingAlpha and deactivated his Twitter account.
`61.
`On July 30, 2018, U.S. News & World Report reported that Steve Eisman, the
`investor who famously predicted the collapse of the U.S. housing market in 2007 and 2008 and was
`featured in Michael Lewis’s book The Big Short, was predicting a similar demise for Tesla. In an
`interview with Bloomberg, Eisman expressed the opinion that Musk had a hard time executing,
`despite being a “very, very smart man.”
`62.
`By July 31, 2018, Tesla’s short interest was back to 35 million shares, or 20% of the
`company’s outstanding stock.
`63.
`On July 31, 2018, Musk and Sam Teller, who was employed by Tesla as Director,
`Office of the CEO, attended a meeting with representatives of the Public Investment Fund at the
`“Tesla Factory” in Freemont, California, for approximately 30 to 45 minutes. Deepak Ahuja,
`Tesla’s Chief Financial Officer, joined the meeting about halfway through. On several occasions
`since January 2017, the Public Investment Fund had expressed interest in exploring with Musk a
`going-private transaction involving Tesla, but no proposed transaction had resulted from those
`discussions. During the July 31, 2018 meeting, a representative of the Public Investment Fund
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`mentioned that the fund would still be interested in exploring a going-private transaction if Tesla
`was prepared to build a production facility in the Middle East.
`64.
`No additional details or terms were discussed, including fundamental terms such as:
`the dollar amount to be invested; the ownership percentage for the fund if Tesla was to go private;
`any acquisition premium to be offered to current Tesla shareholders; any potential restrictions on
`foreign ownership of a significant stake in Tesla; the fund’s available liquid capital to contribute to
`a going-private transaction; whether the fund was experienced in going-private transactions;
`regulatory obstacles associated with a going-private transaction; or what, if any, approval from
`Tesla’s Board was needed to take Tesla private.
`65. When the July 31, 2018 meeting concluded, no legal documents had been signed,
`no term sheets had been executed, no advisors had been engaged, and no decision had been made
`with regard to the Middle East production facility.
`66.
`On August 1, 2018, Tesla reported its financial results for the second quarter of 2018
`in an investor “Update Letter” and during an investor conference call. Tesla’s results exceeded
`analyst revenue expectations.
`67.
`In the “Update Letter” published on August 1, 2018, Tesla also affirmed production
`targets of 6,000 Model 3 vehicles per week by the end of August.
`68.
`Tesla’s quarterly results led to a 16% surge in the company’s stock price from
`$300.84 to $349.54.
`69.
`On August 2, 2018, after the market closed, Musk sent an email to Tesla’s Board,
`Chief Financial Officer, and General Counsel. The subject line of the email stated “Offer to Take
`Tesla Private at $420.” In the email, Musk explained that he wanted to take Tesla private in order
`to, among other reasons, avoid the “constant defamatory attacks by the short-selling community”
`against Tesla. Musk also asked that the “matter be put to a shareholder vote at the earliest
`opportunity” and advised that the “offer expires in 30 days.” At this point in time, Musk thought
`there was “a lot of uncertainty” regarding a potential going-private transaction and believed that the
`likelihood of consummating a transaction was about 50%.
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`70.
`According to Musk, the $420 per-share price for the going-private transaction was
`based on a 20% premium to the closing price of Tesla’s stock on August 2, 2018, which was
`$349.54 per share. Musk believed that 20% was a “standard premium” in going-private
`transactions. Although the precise calculation equaled $419.49, Musk rounded the price up to $420
`per share because he thought his girlfriend at the time, Claire Elise Boucher (also known as
`“Grimes”), would find it funny due to the significance of the number to marijuana users.
`71.
`Since Musk’s meeting with the Public Investment Fund on July 31, 2018, Tesla’s
`stock price had increased over 17% due to the positive earnings results announced by the company
`on August 1, 2018. If Musk were to have applied the 20% premium to Tesla’s stoc