Tesla and Elon Musk Triumph in Shareholder Lawsuit Over Self-Driving Tech Claims
By Jonathan Stempel
(Multibagger) — Tesla (NASDAQ: TSLA) and its CEO Elon Musk have successfully defended against a lawsuit alleging that they misled shareholders by exaggerating the efficacy and safety of the company's self-driving technology to inflate its stock price.
U.S. District Judge Araceli Martinez-Olguin in San Francisco ruled that shareholders did not adequately demonstrate that Tesla and Musk should be held accountable for asserting that their self-driving technology was near completion and safer than human drivers, despite it being reportedly "plagued with safety issues" and contributing to driver inattentiveness.
Tesla vehicles are equipped with "Autopilot" software, which enhances self-driving capabilities, and the company has marketed "Full Self-Driving" (FSD) software upgrades for further autonomous functionality. Judge Martinez-Olguin noted that some of Tesla’s and Musk's statements were not definitively false, while others could be considered permissible as they pertained to future expectations for the technology.
Moreover, the judge pointed out that Musk's "hands-on" management style did not necessarily imply he had more knowledge than he disclosed. The nearly $34 billion profit Musk made from selling Tesla shares between February 2019 and February 2023 did not indicate he was exploiting other shareholders.
Shareholders claimed Musk, currently the world's richest individual, accrued approximately $39.4 billion from these stock sales—an amount comparable to Vermont’s gross domestic product. Despite the dismissal, the lawsuit was dismissed without prejudice, allowing shareholders the opportunity to amend and refile.
Tesla still faces ongoing investigations by the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and the California Department of Motor Vehicles regarding its self-driving claims.
The case is Lamontagne v Tesla Inc et al, U.S. District Court, Northern District of California, No. 23-00869.
Analysis and Breakdown
What is this article about?
This article reports on a legal victory for Tesla and its CEO Elon Musk, who were accused of defrauding shareholders by overstating their self-driving technology's capabilities. The lawsuit was dismissed by a judge, but Tesla still faces other investigations.
How does this affect your life and finances?
- For Tesla Investors: The dismissal of the lawsuit could provide short-term relief and stability for Tesla’s stock price. However, ongoing probes by governmental agencies could still impact the stock negatively if they result in fines or other penalties.
- For Tesla Customers: If you own or are considering purchasing a Tesla with self-driving capabilities, it’s essential to stay informed about these legal and regulatory developments, as they might affect the features and safety of your vehicle.
- For the General Public: This case highlights the importance of scrutinizing claims made by companies about emerging technologies. It underscores the need for transparency and regulatory oversight to ensure consumer safety and protection.
In simpler terms: Tesla and Elon Musk won a court case that accused them of lying about how good their self-driving cars are. However, the company is still being investigated by the government. If you own Tesla stock or a Tesla car, keep an eye on these developments as they could affect your investment or the car's features.