Newsdeck

CLASS ACTION

Musk’s tweet about taking Tesla private cost investors millions, jury told

Musk’s tweet about taking Tesla private cost investors millions, jury told
Elon Musk. (Photo: EPA-EFE / Carina Johansen)

(Bloomberg) — Elon Musk misled Tesla shareholders when he tweeted in 2018 about taking the company private with ‘funding secured’ and cost them millions of dollars, a lawyer for investors told jurors at the chief executive officer’s securities fraud trial.

‘His lies caused regular people, like Glen Littleton, to lose millions and millions of dollars,” attorney Nicholas Porritt said in his opening arguments Wednesday, referring to the named plaintiff in the class-action case. In order for markets to operate normally and fairly, it’s “critical that he is held, and the company is held, liable,” Porritt said.

Alex Spiro, Musk’s lead lawyer, countered in his address to jurors that Musk’s intention to take Tesla private was “indisputably true,” and the messages on Twitter “didn’t materially matter to the market.”

Funding to take Tesla private wasn’t a problem, Spiro said, explaining that the only real roadblock was obtaining shareholder approval for a deal structure that would protect Tesla shareholders.

The duelling arguments set the stage for a two-week trial in San Francisco federal court that will test the billionaire entrepreneur’s credibility — and which could cost him, Tesla and the company’s board billions of dollars if they lose.

As the star witness, Musk is expected to testify that his short-lived plan to take Tesla private was solidly based on discussions he had with Saudi Arabia’s sovereign wealth fund. He subpoenaed the governor of the Kingdom’s Private Investment Fund to testify at the trial, but withdrew the request after attorneys for Yasir Al-Rumayyan argued he wasn’t legally obliged to show up.

Porritt argued that Musk actually had no deal in place for what would have been a $60-billion transaction, and that the initial tweet on 7 August 2018 about taking Tesla private at $420-a-share was sent without advance notice to Tesla’s board.

Tesla’s stock price “exploded” after the tweets, so much that trading was suspended due to investor response, the plaintiffs’ lawyer said, showing jurors the spike on a graph. As doubts grew in the market in the days that followed, The New York Times published a report on 16 August that included an interview with Musk and confirmed that the tweets were empty, the lawyer said, adding that the take-private plan was publicly dropped by Musk on 23 August.

Spiro defended Musk’s actions, telling the jury that “inaccuracies and vagueness in tweets didn’t matter to markets. He was actively pursuing taking Twitter private.”

“This was not fraud, not even close,” he said.

The CEO’s lawyer told the jury that leading up to 7 August, Musk talked to Michael Dell, as well as investors at Silver Lake Management and Goldman Sachs Group. “Mr Musk was doing his homework,” Spiro said, and in those conversations, the structure of a deal to take Tesla private might have been unique, but funding wasn’t an issue, Spiro said.

The Saudi investment fund hadn’t heard a word of his intentions, Spiro said. “He didn’t need to talk to them,” he said. On the morning of 7 August, Saudi Arabia was making the news with a major stake in Tesla that broke in the Financial Times, he said, adding that Musk’s tweet was a reaction to that news.

It was an effort to get the “state of play out to the world”, Spiro said, calling the tweets “a thought bubble” about what Musk was considering. “Considerations aren’t certain, everybody knows that.”

Gallery

Comments - Please in order to comment.

  • Jane Crankshaw says:

    Not the first time Musk’s tweets manipulated the markets – there was the tweet that sent Bitcoin on a trajectory, when he then used the Bitcoin profit towards Teslas quarterly earnings profit! Then the tweet that he was getting out of Bitcoin that resulted in a price collapse! His tweets, whilst anticipating a certain outcome to be used to his advantage cannot really be called fraudulent – every person has the choice to evaluate the veracity of what they see and hear when making a decision. Investing is a game of chance with winners and losers. It’s not Musks fault if investors decisions were the wrong ones. How Musk operates is not really cricket but is also not illegal. The SEC needs to re look its rules on “insider trading” and make some changes. In my opinion, Musk will not lose this case based on current interpretations.

Please peer review 3 community comments before your comment can be posted

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options