According to the US Securities and Exchange Commission (SEC), investors who suffered financial losses when Elon Musk tweeted about the possibility of taking his electric car company Tesla private will soon receive compensation. The compensation will come from a $42.3 million fund established as part of Musk’s settlement for federal securities fraud charges.
In a court filing on Wednesday evening, the SEC stated that approximately 3,350 eligible claimants will collectively receive a payout of $41.53 million, recovering 51.7% of their losses. Certain amounts will be reserved to cover fees, taxes, and expenses. This means that each claimant will receive an average of about $12,000.
This “fair fund” was established as part of a settlement resulting from Musk’s 2018 tweet.
In the tweet, Musk claimed to have secured funding for a Tesla buyout at a premium. However, this turned out to be a lie. Musk’s false tweet led to significant volatility in Tesla’s stock price and caused many investors to suffer financial setbacks.
Initially, the fund was set at $40 million, with Musk and Tesla contributing $20 million each. According to Reuters, it ultimately grew to $42.3 million with interest payments.
US District Judge Lewis Liman, who presided over the SEC case, expressed his intention to approve the payouts by September 1 or shortly thereafter.
The SEC settlement also involved a consent decree through which Musk relinquished his role as Tesla’s chairman and agreed to have a Tesla lawyer oversee the approval of some of his Twitter posts.
The SEC’s calculation only includes trades made within 27 hours of the tweet and excludes options and derivative trades. Additionally, it only applies to Tesla’s common stock.
In addition to the SEC settlement, investors have launched a class action lawsuit against Elon Musk for the same tweet.
The investors in the class action case lost at trial in February. The jury quickly cleared Musk of fraud charges, taking only two hours to reach a verdict.
Nevertheless, it was a victory of sorts for the class action case to even go to trial. The vast majority of corporate securities fraud claims are either dismissed or resolved through settlements.
The investors have decided to appeal the ruling.