© Reuters. Elon Musk arrives at the In America: An Anthology of Fashion themed Met Gala at the Metropolitan Museum of Art in New York City, New York, U.S., May 2, 2022. REUTERS/Andrew Kelly
By Jody Godoy
SAN FRANCISCO (Reuters) -Tesla Inc CEO Elon Musk “lied” when he said that funding was “secured” to take the company private, a lawyer for Tesla (NASDAQ:) investors said on Wednesday, as an attorney for Musk argued that the billionaire merely used the “wrong words” when he tweeted about his plans in 2018.
Tesla investor Glen Littleton 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 on Twitter in August 2018.
Musk’s alleged lies caused “regular people” to lose millions, Nicholas Porritt, lead attorney for the investors, told a jury in San Francisco during opening statements.
“Millions of dollars were lost when his lies were exposed,” he added.
Musk’s lawyer disputed this characterization, saying that the billionaire was “serious” about taking the company private in 2018, but ultimately encountered shareholder opposition.
“You will come to learn very soon that this was not fraud, not even close,” Alex Spiro said during opening statements.
Musk believed that financing was not an issue and was “taking steps” to make a deal happen, Spiro told the jury.
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,” Spiro said.
“In a rush, he used the wrong words,” he said.
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.
The defendants include current and former Tesla directors, whom Spiro said had “pure” motives in their response to Musk’s plan.
Spiro said on Wednesday that Tesla’s stock price jumped in response to Musk saying he was considering taking the company private, which he said was true. It did not jump on Musk’s assertion about funding, Spiro said.
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. The deal did not happen.
While shareholders sue hundreds of companies and their executives for alleged securities fraud every year, very few of those cases make it to trial. The vast majority are either dismissed by courts or settle.
Not among the jurors selected on Tuesday were some critics of Musk, such as one potential juror who said the chief executive, who has gained a reputation for the unpredictable, was “a little off his rocker.”
After opening statements, shareholders began calling witnesses to the stand, starting with investor Littleton.