The question of whether Tesla CEO Elon Musk is an impostor or whether his words were too careless was headlined in a courtroom in San Francisco on Wednesday. In 2018, Musk’s infamous tweet revealed a potential value of $420 per share as funds were “secured” to take Tesla private. Already, he’s been suing executives for billions of dollars in damages in a two-day class action lawsuit that Tesla shareholders who traded shares in the company days after Musk’s tweets.
The outcome of the trial will depend on the wording and intent of the tweet.Plaintiffs claim it caused losses for ordinary investors, and Musk’s attorneys argue the tweet is also true (he really Did it I’m going to keep Tesla private) and a mistake (my choice of the word “funding secured” was wrong).
A jury must determine one of the following: 1) Musk deliberately tweeted false information that affected Tesla’s stock price. 2) The tweet artificially inflated Tesla’s stock price by exaggerating the financing status of the deal. 3) If so, how much?
Glenn Littleton, a Tesla investor and lead plaintiff in the lawsuit, took Musk’s word Wednesday and ultimately liquidated between 90% and 95% of his position for fear of financial ruin. said.
“I couldn’t afford to stay,” Littleton told the jury.
His lawyers claimed he lost $3.5 million as a result.
Musk’s reputation at stake
If Musk loses the case, he will likely be forced to sell a lot of money. But the CEO’s already fragile reputation could be at risk if a jury finds that Musk deliberately tweeted false information.
Since he bought Twitter, shareholders have lost faith in star execs and started yelling even louder at the platform’s void. He even said that one of the reasons he did so could be due to the drama on Twitter, including Musk selling his Tesla shares to fund his Twitter business.
Musk’s lawyers seem to be struggling with the reputational damage. They suggested moving the trial to Tesla’s headquarters in Texas from 2021, as the jury pool may be biased against Musk after executives hijacked Twitter and even fired him. , alleging Musk failed to get a fair trial in San Francisco.more than 3,750 employees.
U.S. District Judge Edward Cheng sided with the shareholders’ attorneys and dismissed the bid, essentially saying that Musk made his bed and now he can lie in it.
“Funds secured.”
In the 10 days following the tweet (August 7-17), Tesla’s stock price changed by about $14 billion.
A few days later, Musk backed off somewhat in a blog post explaining why he wanted to keep Tesla private. He said he really believed he was secured and all that was needed was to move the process forward.
It turned out that the funds had not been secured, and just days after the tweet, the Saudis pulled out. Musk then accused him of throwing the president of the Kingdom’s Public Investment Fund “under the bus.” Meanwhile, that September, Saudi funds invested his $1 billion in Lucid Motors to launch Air.
The whole fiasco led to an investigation from the Securities and Exchange Commission. Musk and Tesla settled without admitting wrongdoing, and together he was fined $40 million. Musk was forced to step down as chairman of Tesla’s board of directors, and his executives agreed to stay calm about Tesla-related tweets that could impact the public market. (Though he has not adhered to the agreement.)
‘False and misleading’
Last April, Judge Chen ruled that Mr. Musk’s tweets were “false and misleading” and that Mr. Musk “knew the truth and recklessly said it.”
While this may be good news for plaintiffs trying to convince jurors whether their statements affected Tesla’s stock price, this is a jury trial and therefore the outcome depends solely on Chen. That’s not to say the jury will also have to decide whether they believe Musk acted willfully and the amount of damages.
Musk’s lawyers said Wednesday that executives intended to take Tesla private and made a “snap decision” to tweet that they were considering doing so. “Funding secured,” he tweeted, as he had just read a news story revealing that Saudi Arabia was investing heavily in the company.
In his opening argument in San Francisco federal court, Alex Spiro, Musk’s attorney, told jurors, “Incomplete or not, he rushed to the point that disclosure was the better way to go. “He didn’t want the leak to happen.”
Spiro said Twitter’s message had no impact on the market, and in fact, Tesla’s stock price rose after the details of the plan were revealed at a meeting after the tweet.
Nicholas Porritt, a lawyer representing Tesla shareholders, said tweets and other messages from Musk and Tesla were “lies” and caused ordinary investors to lose millions of dollars.
