Musk, the chief executive of Tesla and Twitter, was called to testify on the third day of a three-week trial in which shareholders allege they suffered billions worth of financial harm and steep losses from a false claim that he had financing to take Tesla off the public markets.
Judge Edward M. Chen has already ruled that claim untrue. But the case hinges on the extent to which the claims were material to subsequent market moves, and how much investors relied on Musk’s tweets in making the trades that lost them money. If the jury finds Musk or Tesla liable — or both — then jurors have to decide on the defendants’ responsibility for the losses. Several current and former Tesla board members are also named in the lawsuit.
Musk tweeted on Aug. 7, 2018: “Am considering taking Tesla private at $420. Funding secured.” He followed that with a subsequent tweet, also referenced in court documents, reading “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”
In the days after, Musk’s claim fell apart. Musk disclosed on Aug. 13, 2018, he had been in communication with the Saudi Arabian sovereign wealth fund over the potential of taking the company private at a price that would value the company at more than $70 billion. But the post was far from definitive.
Tesla published a blog post from Musk on Aug. 24, 2018, saying he intended to keep Tesla public. “That said, my belief that there is more than enough funding to take Tesla private was reinforced during this process,” it read.
The Securities and Exchange Commission sued Musk that September for allegedly lying to investors over the claim. Musk and Tesla settled, ultimately paying $20 million fines each, and Musk agreed to step aside as Tesla board chairman.
Musk has made repeated court appearances over the last several years regarding his leadership of Tesla, including for a lawsuit related to his compensation, as well as in a case related to the buyout of solar energy company SolarCity.
On Wednesday, plaintiff and class representative Glen Littleton testified that he saw “Funding secured” as the key claim in Musk’s statements, and additional context as subordinate to it. Littleton has said he lost more than $3.5 million as a result of the matter.
But the class represents shareholders across the spectrum, including long and short-sellers, and large and small-time investors.
Another witness, Timothy Fries, testified Friday that the “Funding secured” tweet cost him $5,000.
“I felt that I lost money due to a misrepresentation,” he said from the witness stand. “I hope to have my funds recovered, my losses recovered. … I wasn’t ready to purchase shares until I saw the tweet.”