A federal judge in San Francisco has dismissed a securities fraud lawsuit in which some Tesla shareholders accused the electric car maker and its CEO, Elon Musk, of misleading them about the progress of production of its Model 3 vehicle, Reuters reports.
In a decision made public on Monday, US District Judge Charles Breyer said that while shareholders claimed that Tesla fell short of its production goals, “federal securities laws do not punish companies for failing to achieve their targets,” the report said.
Breyer said the shareholders have until Sept. 28 to amend their complaint.
The case is separate from lawsuits accusing Tesla and Musk of scheming to hurt short-sellers through Musk’s Aug. 7 tweets about taking the company private, and that funding had been “secured.”
Musk abandoned that proposal late Friday night.
Tesla formally launched the Model 3 in July 2017, touting it as a vehicle for the masses, and attracted deposits from more than 500,000 potential customers.
But shareholders said Musk knew Tesla was “woefully unprepared” to meet its production goal of 5,000 Model 3s per week, and that Tesla’s share price was inflated until after the company finally cut its production target last November.
Belief in the Model 3 had helped propel Tesla’s share price 62 percent higher in the 1-1/2 years after the Palo Alto, California-based company unveiled it in March 2016.
But the judge said shareholders failed to show that Tesla needed to be clearer that Model 3 production could fall short.
The company eventually blamed its production shortfall on “bottlenecks” at its battery factory outside Reno, Nevada and its assembly plant in Fremont, California.
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