Tesla has succeeded in rebuffing at least one lawsuit from the gathering pile of legal complaints that has built up against the electric car maker and its chief executive, Elon Musk.
A federal court in San Francisco on Monday dismissed a lawsuit accusing the electric car maker and some of its executives, including Mr Musk, of misleading investors last year about production delays surrounding its new Model 3 sedan.
The lawsuit was filed in October and updated in March, after it became clear that the company was falling far short of its original goal of producing 5,000 vehicles a week by the end of 2017.
Judge Charles Breyer, accepting Tesla’s motion to dismiss the action, said the company had covered itself by issuing “meaningful qualifications” when making its projections. He added: Federal securities laws do not punish companies for failing to achieve their targets.”
Tesla’s share price surged at the start of 2017, as Wall Street looked forward to a midyear launch of the Model 3 — Tesla’s first attempt at a mass-market vehicle — with a rapid ramp-up in production predicted to follow. The stock climbed 80 per cent in the months leading up to the launch, but fell back by 30 per cent in the following nine months as production problems became apparent.
Tesla shares ended 1 per cent lower on Monday, the first day of trading since Mr Musk declared that he was abandoning a proposal made earlier this month to delist the electric carmaker.
The shareholders behind the complaint argued that Tesla must have known that it could not meet its initial goals, since a former production executive and suppliers to the company had described the targets for year-end 2017 as “impossible”.
The Securities and Exchange Commission is reported to have been looking into Tesla’s disclosures about its Model 3 problems, even before Mr Musk’s recent Twitter bombshell about a potential buyout drew closer regulatory scrutiny.
Dismissing the assertions that Tesla couldn’t possibly have met its targets, Judge Breyer said they were not backed up by any hard evidence. He added that Tesla had always said its targets were ambitions and there was ample information available for investors to make their own assessments. He also pointed to warnings in Tesla’s official filings and comments on earnings calls from Mr Musk that he said had served as adequate warning of the risks.
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