Trial begins in San Francisco between Elon Musk and Tesla shareholders over his controversial “privatisation” tweet in 2018
Elon Musk’s “privatisation” trial has begun this week, and in the opening remarks lawyers representing Tesla investors levelled serious allegations against the Twitter CEO.
As arguments began on Wednesday, the attorney for a group of shareholders charged that Elon Musk “lied” when he tweeted in 2018 that he had “secured” funding to take Tesla private, the Guardian reported.
Lawyers for the investor are seeking to hold Musk responsible for “billions” investors say they lost after the claim drove up the share price. They argued that Elon Musk tweets, and “regular people” watch their fortunes evaporate.
Elon Musk had already tried and failed to move the trial away fro San Francisco, arguing that he would not receive a fair trial.
The issue started in August 2018, when out of the blue Musk had tweeted that he was considering taking Tesla private and that he had secured funding to do so.
He abandoned the idea 17 days later, but Musk was immediately hit with two lawsuits which alleged that Musk’s Tweets were a fraudulent effort to attack short sellers.
JP Morgan also sued Musk over the matter, claiming they had lost $162 million as a result.
These tweets also brought Musk to the attention of the SEC, which accused Musk of securities fraud, and alleged he made a series of “false and misleading” tweets about potentially taking Tesla private.
Indeed, the SEC sued Tesla and sought to ban Elon Musk from acting as an officer or director of a publicly traded company.
In the end, the US financial regulator forced Musk to step down as chairman of Tesla and pay $20m in penalties.
Tesla also had to pay an additional $20m.
Musk however was allowed to retain the CEO role, but had to submit any public statements (including tweets) about the company’s finances to vetting by its legal counsel before publishing them – something he has fought to overturn.
This trial concerns Tesla investor Glen Littleton, who is seeking damages on behalf of shareholders who traded the company’s stock in the days after Musk posted his plan to take the company private.
He is seeking ‘billions’ in damages on behalf of those who traded stock after Musk posted his “privatisation” plan.
According to the Guardian, Elon Musk could end up taking the stand as early as Friday.
While the plaintiffs lawyers portrayed Musk as a reckless liar who caused “regular people” to lose millions, the defence team for the tech billionaire painted him as a well-intentioned visionary, who merely used the “wrong words” in describing the deal.
Littleton, a 71-year-old investor from Kansas City, Missouri, was the first witness called to the stand, the Guardian reported. He reportedly said Musk’s claim about the financing alarmed him because he had purchased Tesla investments designed to reward him for his belief that the EV maker’s stock would eventually be worth far more than the $420.
He said he sold most of his holdings to cut his losses but still saw the value of his Tesla portfolio plunge by 75 percent.
“The damage was done,” Littleton reportedly said. “I was in a state of shock.”
The case may hinge on whether Musk knowingly drove up Tesla’s share price with his 2018 tweets, saying he was securing funding to take the company private in what would have been a $72bn buyout. The stock collapsed a week later, when it became clear that he didn’t have the financial backing to pull off the deal, the Guardian reported.
“Millions of dollars were lost when his lies were exposed,” Nicholas Porritt, lead attorney for the investors was quoted by the Guardian as saying, before a jury in San Francisco on Wednesday – in what is expected to be a three-week trial.
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.
During Tuesday’s jury selection, some potential jurors described the chief executive, who has gained a reputation for the unpredictable, as “narcissistic”, “unpredictable” and “a little off his rocker”, the Guardian reported.
Elon Musk has been in court before, most memorably in a defamation lawsuit filed by British cave diver Vernon Unsworth.
Musk had been sued in 2019 after his controversial ‘pedo guy’ tweet about one of the rescuers of the Thai boy football team who were trapped in a flooded cave in 2018.
During his testimony, Musk apologised directly to Unsworth, but insisted that that his “pedo guy” tweet had not been meant to be taken literally.
Musk ultimately escaped serious censure over that tweet.
This lawsuit stemmed from the media attention after a football team of boys in Thailand became trapped in a flooded cave system during June and July 2018.
Musk had taken exception when one of the rescuers, British caver Unsworth ridiculed the mini-submarine that Musk had built and transported to the location, in an attempt to help free the trapped boys.
During a CNN interview Unsworth said the mini-submarine wasn’t used in the rescue, and that it was a “PR stunt” and that Musk could “stick his submarine where it hurts.”
Musk fired back and labelled the British cave rescuer as a “pedo guy” in a Tweet that has since been taken down.