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Monday, June 17, 2024 | Back issues
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Angry Tesla investor testifies first in trial over Musk tweet

The investor said he was a Musk admirer and took the billionaire at his word when he tweeted his plans to take Tesla private.

SAN FRANCISCO (CN) — As the first full day of the Tesla securities trial got underway Wednesday, defense attorney Alexander Spiro told jurors in his opening argument, “Twitter haikus don’t move the market.”

Attorneys for both sides of the dispute over whether remarks made by Tesla CEO Elon Musk via Twitter tanked the price of Tesla shares, thereby costing plaintiffs millions of dollars, made their opening presentations to the nine-member jury at the Philip Burton Federal Building and U.S. Courthouse on Wednesday.

Musk faces trial in a lawsuit filed by Tesla shareholders who say they were misled by an Aug. 7, 2018, tweet in which he said he had secured financing for a Tesla buyout. That buyout never came to fruition, however, and stockholders cried foul.

The "haiku" in question, Musk’s nine-word tweet stating “Am considering taking Tesla private at $420. Funding secured,” is what set everything in motion. Tesla stock jumped in value and then sank when it when it became clear nothing of the sort was going to happen. It also cost Musk $40 million when the U.S. Securities and Exchange Commission fined him following an investigation.

Inside the staid but cavernous courtroom of U.S District Judge Edward Chen, plaintiffs' attorney Nicholas Porritt told jurors in no uncertain terms that in his tweet, Musk lied to the public.

“And his lies caused regular people like Glen to lose millions and millions of dollars,” Porritt said of the lead plaintiff, Glen Littleton. “Elon Musk’s statements were false and untrue. There’s no doubt Tesla investors were hurt.”

Porritt told jurors that cases like this matter because so much of the finances of daily life — pensions, insurance, safety, and retirement — depend upon the stock market.

“People rely on the stock market to support their families,” he said. “For the stock markets to work properly, you need accurate and reliable information and as level a playing field for everyone, not manipulated by lies.” Defense attorney Alex Spiro, however, told jurors that Musk really did want to take Tesla private.

“That is undisputedly true, and they cannot prove otherwise,” he said. If anything, Spiro told jurors, Musk is guilty of poor wording. Plaintiffs’ experts leapt on that, he said, blaming it for the market’s reaction but what the market really reacted to was “I am considering going private” and not “Funding secured.”

“If the market knew all the backdrop we’ve been discussing, it would not have made a material difference to a reasonable investor,” Spiro said.

Littleton, a Kansas City, Missouri, investor suing on behalf of shareholders, took the stand as the first witness. While Porritt’s questioning of Littleton was gentle enough, the cross-examination grew more pointed, often leaving the 71-year-old seemingly confused at times.

Defense attorney William Price cross-examined Littleton and suggested he, like the market, reacted to Musk’s desire to take Tesla private and not the statement that funding was secured.

Littleton insisted that — as someone who admires Musk — he was motivated by the idea that funding for the undertaking was in place. He said he had reacted quickly to the tweet because the vast majority of his holdings were invested in Tesla and the news hit him hard. He reacted so quickly because he wanted to ensure his livelihood, he said.

“I saw it about half an hour after it came out, or less,” he testified. ”I was pretty shocked. That put at risk almost all my positions. It was a complete statement; he was taking it private. Absolute.”

Price asked Littleton when he might have seen a blog post that, he said, would have cleared up the matter for Littleton and anyone else in a similar situation. Littleton agreed that he had seen the post, but could not verify when that might have been. Price pulled up documentation suggesting Littleton had seen the post shortly after it was published.

Nearly one week after Musk posted the now-notorious tweet, he followed up with a blog post explaining his strategy for taking the electric car company private, a move he said was supported by the Private Investment Fund of the Kingdom of Saudi Arabia, which he had secured in a meeting with the fund’s managing director.

“I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to 'funding secured' in the Aug, 7th announcement,” Musk wrote in the blog piece.

Although Littleton told the court he wasn’t sure exactly when he’d read the blog post himself, he insisted it was his belief in Musk’s statement that funding was secured that prompted his decision.

Testimony resumes Friday morning.

Categories / Media, Securities, Technology, Trials

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