Lawsuits over Elon Musk’s ‘funding secured’ tweet could potentially cost Tesla billions

Early last week, Elon Musk took to Twitter and said that funding to take Tesla private at $420/share was secured. In the wake of Musk’s tweet, Tesla shares immediately jumped by more than 10%, effectively putting some serious pressure on Tesla short sellers in the process. As we would later find out, funding for Musk’s plan was not, in fact, secured in any sense of the word.

Before long, accusations that Musk engaged in blatant stock manipulation began making the rounds. Not surprisingly, the bizarre tweet put Tesla’s mercurial CEO in hot water, with the SEC last week even launching a preliminary investigation into the matter. The SEC, though, could be the least of Tesla’s worries.

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According to Charles Gasparino of Fox Business News, Tesla board members are far more anxious about what a deluge of class action lawsuits against the company would mean for the company’s bottom line. Gasparino notes that Tesla’s legal team has determined that the fallout from Musk’s tweets could cost the company millions in legal fees and potentially billions in damages from investor lawsuits. Interestingly enough, Tesla has reportedly already hired three outside law firms to handle impending suits.

“One of their main worries,” Gasparino said earlier today, “in addition to the SEC, is the private litigation, and they’re starting to think about how much potential liability exists in the private litigation if investors sue, claiming that they lost money based on Musk’s tweet.”

Whereas the SEC could slap Tesla with fines that range in the millions of dollars, private litigation could potentially impact Tesla to the tune of billions of dollars. Compounding matters is that if Tesla reaches a deal with the SEC, the deal could call for an admission of guilt on Tesla’s behalf. Should that happen, Gasparino explains: “That will ramp up the litigation even more, and that’s one of the things that the lawyers inside the company are really worried about.”

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See the original version of this article on BGR.com