Musk’s tweet cost investors millions, jury told


Elon Musk misled Tesla Inc. 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 Musk was “serious” about taking the company private, but used the “wrong words.” He said the only real roadblock was obtaining shareholder approval for a deal structure that would protect Tesla shareholders.

The dueling 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 solid 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 isn’t legally obligated 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 Aug. 7, 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 an Aug. 16 story 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 Aug. 23.

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 Aug. 7, 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 Aug. 7, 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.”

Spiro said that while the tweets contained “technical inaccuracies,” Musk was concerned that some investors knew about his go-private plan and wanted to get the information out to the “everyday shareholder” that he “wanted to protect.”

The case is a rare securities class action trial, and Musk and his company are bucking the norm of settling claims that clear high legal hurdles, making for a potentially dramatic trial at which Musk himself is expected to take the stand as early as this week.

A jury of nine will decide whether the tweets artificially inflated Tesla’s share price by playing up the status of funding for the deal, and if so, by how much.

U.S. District Judge Edward Chen, who is overseeing the trial, has ruled that Musk’s statements about the status of the deal were false and Musk made them recklessly.



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