Tesla edged slightly lower in Tuesday's stock market as Reuters reported that the EV giant and CEO Elon Musk have been sued by TSLA shareholders for allegedly committing securities fraud around their autonomous self-driving vehicle claims.
Lawyers filed the class action suit late Monday in Austin, Texas, federal court that seeks unspecified damages for Tesla shareholders between April 19, 2023 and June 22, 2025, according to Reuters. Tesla launched its limited robotaxi ride-hailing service in Austin on June 22.
The shareholders in the lawsuit allege that Tesla and Musk overstated the effectiveness of its autonomous driving capabilities in order to prop up the TSLA stock price.
Musk late Tuesday on X responded to the lawsuit.
"It's never actually investors," Musk said, claiming that instead it is "class-action lawyers grifting for their percentage of the verdict."
Tesla stock fell as low as 305.50 before regaining ground, ending down about 0.2% to 308.72 at Tuesday's stock market close, with the broader indexes also falling. TSLA advanced around 1% early Wednesday.
Shares fell 4.25% last week to 302.63, retreating from key moving averages, but still in an actionable base.
The recent lawsuit comes just days after a federal jury in Miami, Fla., found the EV giant partly liable in the 2019 death of a pedestrian who was struck by a Tesla vehicle that was in Autopilot.
Tesla Lawsuit Season
A jury of eight people decided Friday that Tesla was partly at fault in the case, due to the use and marketing of its Autopilot technology. Tesla will have to pay a large portion of $329 million in punitive and compensatory damages, according to news reports.
The $200 million in punitive damages were only assessed vs. Tesla, plaintiffs' attorneys told CNBC. They expect the EV maker to pay their clients $242.5 million, which includes one-third of the compensatory damages.
Musk said on X Friday that Tesla will appeal the ruling.
The lawsuit in Florida was over the 2019 death of Naibel Benavides Leon. The jury trial began on July 14 in Miami. The facts of the case are that George McGee was driving his Tesla Model S in April 2019 when the car crashed into a parked SUV at more than 50 miles per hour. Benavides Leon, who had been standing next to the vehicle, was killed and Dillon Angulo was injured. Before the crash, McGee had engaged the Autopilot system, which can steer, brake and accelerate the car on its own.
Federal regulators have opened multiple investigations into Tesla's driver-assistance systems, including Autopilot and full self-driving, FSD.
The verdict that Tesla was partially at fault in the 2019 crash comes as Musk and Tesla are looking to expand their robotaxi ride-hailing service across the U.S., touting the company's autonomous driving capabilities as the key to valuation for the EV giant.
Musk on Sunday posted to X that Tesla vehicles "can drive themselves!"
Piper Sandler analysts on Monday wrote that Tesla investors should not overreact to the Miami court ruling.
"We've learned to ignore headlines related to Autopilot reliability. But the robotaxi rollout has breathed new life into this topic, and we feel compelled to comment on recent media intrigue," the firm wrote.
"This case does not have direct implications for Tesla's FSD rollout," Piper Sandler analysts added.
Tesla Stock Trend
TSLA shares dropped 1.8% to 302.63 during Friday's broad stock market sell-off, after slipping 3.4% on Thursday as the stock market responded to Tesla officially "expanding" its ride-hailing service to the Bay Area. Tesla currently has "safety operators" in the driver's seat, making it little different from FSD that can be equipped in current Tesla models.
In Austin, Texas, the limited robotaxi ride-hailing service has a safety operator in the front passenger seat.
In late July, TSLA undercut its 50-day and 200-day moving averages as Musk warned of a "few rough quarters" ahead in the Q2 conference call.
Tesla stock is still in a new base with a traditional 367.71 buy point, according to MarketSurge chart analysis. That base is within a much-larger consolidation.
The stock initially soared after the robotaxi launch but TSLA is now down around 4% since the June 22 service release.
Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks
As of Tuesday's close, Tesla stock was up 30% since the April 22 Q1 conference call, lifted by robotaxi bets. Shares are down about 23% for the year, and 37% below their all-time high of 488.54.
Tesla stock has a 21-day average true range of 4.12%. The ATR metric, available on IBD's MarketSurge charting tool, gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily stock market action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
Investors can keep tabs on the IBD Leaderboard watchlist, the IBD 50 list of top growth stocks and IBD SwingTrader along with the IBD Sector Leaders list.
Tesla stock has a 58 Composite Rating out of a best-possible 99. The stock also has an 80 Relative Strength Rating and a 56 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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