Lawyers on opposing sides drew the starkly different portraits of Musk for a nine-person jury that will hear the three-week trial. The case is focused on two August 2018 tweets that the billionaire posted on Twitter, which he now owns.
The tweets indicated that Musk had lined up the financing to take Tesla private at a time when the automaker’s stock was slumping amid production problems.
The prospect of a $72 billion buyout fueled a rally in the company’s stock price that abruptly ended a week later after it became apparent that he did not have the funding to pull off the deal after all. Tesla shareholders then sued him, saying that Tesla shares would not have swung so widely in value if he had not dangled the idea of buying the company for $420 per share.
Nicholas Porritt, a lawyer representing Glen Littleton and other Tesla shareholders in the class-action case, promptly vilified Musk as he addressed jurors.
“Why are we here?” Porritt asked. “We are here because Elon Musk, chairman and chief executive of Tesla, lied. His lies caused regular people like Glen Littleton to lose millions and millions of dollars.” He also asserted that Musk’s tweet also hurt pension funds and other organizations that owned Tesla stock at the time.
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Musk’s lawyer, Alex Spiro, countered that the run-up in Tesla’s stock after the tweet mostly reflected investors’ belief in Musk’s ability to pull off stunning feats, including building the world’s largest electric automaker while also running SpaceX, a maker of rocket ships. “Mr. Musk tries to do things that have never been done before. Everyone knows that,” Spiro told the jury.
Spiro added that Musk had been in advanced talks with representatives from Saudi Arabia’s Public Investment Fund to take Tesla private.
“He didn’t plan to tweet this,” Spiro said of Musk’s Aug. 7, 2018, statement at the heart of the trial. “It was a split-second decision” aimed at being as transparent as possible about the discussions with the Saudi fund about a potential deal.
After saying “funding secured” for the buyout, Musk followed up with another tweet that suggested a deal was imminent.
Littleton, a 71-year-old investor from Kansas City, Missouri, was the first witness called to the stand. He said Musk’s claim about the financing alarmed him because he had purchased Tesla investments designed to reward him for his belief that the automaker’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%.
“The damage was done,” Littleton lamented. “I was in a state of shock.”
Littleton’s frustration escalated in October 2018, when he lashed out at Tesla for late deliveries on vehicles for some of his nieces and nephews. That led him to become a lead investor in the lawsuit.
“I still believe in Tesla to this day. I do,” Littleton said.
During cross-examination, a lawyer for Tesla’s board of directors repeatedly questioned whether Littleton had legitimate reason to believe a buyout was inevitable, but the investor remained steadfast even while seeming confused at times.
“‘Funding secured’ was the only thing that mattered to me,” Littleton testified. “That was such a defining statement.”
Musk’s 2018 tweets attracted the attention of securities regulators, who concluded that they were improper and that he was lying. In a settlement, they forced him to pay $40 million and required him to step down as Tesla chairman.
U.S. District Judge Edward Chen, who is presiding over the trial, ruled that the shareholders’ lawyers can’t mention that settlement in the case.
But Chen has already ruled that Musk’s tweet was false, a finding that can be alluded to during the trial without specifically mentioning the determination made by the judge. Pollitt seized on that opportunity during his opening statement, informing jurors that they are to assume Musk’s tweet was false, as the judge allowed. Spiro shook his head as he listened.
The trial’s outcome may turn on the jury’s interpretation of Musk’s motive for the tweets. And Musk will have his chance to make his case to the jury.
After the trial adjourned Wednesday, Porritt told The Associated Press he hopes to call Musk to the stand when the proceedings resume Friday after two other witnesses testify. If the allotted time runs out Friday, Musk will likely testify Monday, Porritt said.
Musk’s leadership of Twitter – where he has gutted the staff and alienated users and advertisers – has proven unpopular among Tesla’s current stockholders, who are worried that he has been devoting less time to automaker at a time of intensifying competition.
Those concerns contributed to a 65% percent decline in Tesla’s stock last year that wiped out more than $700 billion in shareholder wealth – far more than the $14 billion swing that occurred between the company’s high and low stock prices from Aug. 7 to Aug. 17, 2018, the period covered in the lawsuit.
Tesla’s stock has split twice since then, making the $420 price cited in his 2018 tweet worth $28 on adjusted basis now. The shares closed Wednesday at $128.78, down from the company’s November 2021 split-adjusted peak of $414.50.
After Musk dropped the idea of a Tesla buyout, the company overcame a production problem, resulting in a rapid upturn in car sales that caused its stock to soar and made Musk the world’s richest person until he bought Twitter. Musk dropped from the top spot on the wealth list after a stock market backlash to his handling of Twitter.
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