Tesla (TSLA) CEO Elon Musk is set to testify as early as Friday in a federal trial in California to settle Tesla shareholders’ claims of billions of dollars in damages against Musk and the board. of the society.
Tesla shareholders began their chief case on Wednesday, following opening statements from Musk’s attorney that set out the Tesla chief’s defense of a tweet 2018claiming he had “secure funding” to take the electric vehicle company private.
On Friday, New Jersey resident Timothy Fries, the second of two Tesla shareholders to testify, was called to the stand. Fries said relying on Musk’s tweet caused him to lose about $5,000 in Tesla stock trades.
“I assumed Elon was speaking on behalf of the board,” Fries said of Musk’s claim that he secured funding to take Tesla private. Fries said he invested about $18,000 in Tesla on Aug. 1. 7, 2018, tweet, then sold at a loss when the deal failed to materialize.
During cross-examination, Fries admitted that despite the tweet, he understood that a deal to take Tesla private had not been finalized.
“I knew it was still being negotiated,” he said in response to questions from Musk’s attorney.
The class of Tesla shareholders who filed the lawsuit allege that Musk’s Aug. 7, 2018, the funding tweet was false and therefore violated US securities laws. They relied on the veracity of the information, they claim, resulting in business losses over a 10-day period that began on the day of the tweet.
Shareholders say the new information in the tweet sent Tesla’s stock price skyrocketing because the $420-per-share offer Musk tweeted represented a 20% premium to its stock price. stock Exchange. The stock then fell below where it was before the tweet. (Tesla shares have since had two stock splits and are currently trading around $129 per share.)
“These tweets are casual, sporadic thoughts,” Musk’s attorney Alex Spiro told jurors on Wednesday of the privatization deal that never materialized. Musk’s choice of words may have been reckless, Spiro said, though the tweet reflected a “split second decision” to benefit – rather than harm – investors.
According to Spiro, at the time of the tweet, Musk had already held a series of private meetings with executives from the Saudi Public Investment Fund. The fund’s executives, he said, agreed in a handshake deal to take Tesla private at $420 a share.
That commitment, Spiro said, led Musk on Aug. 1. 2 to email Tesla’s board of directors a private, “informal” offer to acquire the company at that price. The offer, he added, positioned Musk as a quid pro quo for his own directors.
“He was considering more than just” taking Tesla private, Spiro told jurors of Musk’s thought process as he wrote the tweet. “He was the prayer.”
However, in August. On Feb. 7, Musk’s accountability to Tesla shareholders changed, Spiro said, when a report in the Financial Times cited an unnamed source who revealed what Musk already knew – that the Kingdom of Saudi Arabia had bought stock on the open market, making his sovereign wealth fund one of Tesla’s top shareholders.
Knowing that he had already engaged in non-public discussions with the fund and that shareholder information should not be selectively disclosed to shareholders, Musk abruptly tweeted the possibility of a private take, Spiro told jurors.
Spiro went on to say that everyone in the room at the time the Saudi fund pledged to take Tesla private would support the deal, and that the fund executive in charge agreed to “do what needed to be done.” ” to privatize the then company. – VE company in difficulty.
Spiro sent a next August tweet from July 7, 2018 from Musk who reaffirmed his “secure funding” message and said only shareholder consent was needed to complete the deal, as well as a same-day blog entry that offered additional details on the website’s contingencies of Tesla.
The blog clarified that Tesla has yet to make a final decision on the privatization deal. And Spiro downplayed the word “only” in Musk’s secondary tweet, saying the market’s lack of response to Tesla’s blog post shows Musk’s tweets haven’t moved the often volatile stock.
“These tweets … they matter to plaintiffs’ attorneys. They didn’t matter to the market,” Spiro said.
The shareholders’ first witness, Group representative Glen Littleton, took the stand on Wednesday after both sides made opening statements.
Littleton testified that he liquidated his call and put options on Tesla once he learned of Musk’s initial tweet.
When he saw the words “secured funding,” he said, he started dumping his positions because he was out of money at Musk’s advertised price of $420. Both sets of options, Littleton said, would quickly drop to $0 if the deal goes through.
In a separate case brought by the U.S. Securities and Exchange Commission in response to the funding tweet, Musk and Tesla settled the case, each paying a $20 million fine. Musk also agreed in the deal to step down as chairman of Tesla’s board of directors and have Tesla’s general counsel review potentially “material” tweets before they are published. Musk is currently seeking to have this part of the colony disbanded.
Musk is expected to testify following testimony from the shareholder’s expert witness, Harvard Law School professor Guhan Subramanian.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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