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Experts abound in final days of trial over Musk tweet

Numerous people associated with Tesla in one way or another have been called in to testify since the trial started this month.

SAN FRANCISCO (CN) — Given that the star of the Tesla securities trial, CEO Elon Musk, did his time in the witness stand early in the proceedings — an examination that stretched over three days — the rest of the trial has been focused on testimony from various witnesses and experts.

With only four hours left for additional testimony, the trial is winding down, and the court expected to pass the case off to the jury on Friday.

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

“Am considering taking Tesla private at $420. Funding secured,” the South African-born multibillionaire tweeted at the time. Tesla stock jumped in value and then sank when it became clear nothing of the sort was going to happen. The tweet also cost Musk $40 million when the U.S. Securities and Exchange Commission fined him following an investigation.

Since Musk, several members of Tesla’s upper echelon and others associated with the company in one way or another have testified. Among them, Egon Durban, CEO and managing partner for SilverLake Partners, one of the largest technology investors in the world and a key partner in Musk’s attempts to take Tesla private.

On Aug. 6, 2018, Durban spoke by phone with Musk, who told him he was considering taking the electric vehicle company private. “Being public was painful,” Musk told him.

The move was unprecedented, Durban told the jury, but he said he believed he could raise seven to 10 billion dollars for the effort.

Dan Bees was head of technology, media, and telecom for Goldman Sachs at the time the notorious tweet was making its rounds through the Twitterverse,

“I was surprised,” Bees testified when plaintiffs’ attorney Nicholas Pirrott asked about his reaction to Musk’s tweet. “I was surprised that we weren’t involved.”

Brian Brinkman, analyst at JPMorgan, told the jury it had occurred to him the tweet might have been a hack.

“It seemed kind of strange and I was a little confused by it,” Brinkman said, adding Musk’s blog post later that day convinced him the tweet was real.

He said he imagined the Tesla board of directors had signed off on the effort, and “it suggested in my mind that all those other things were true.” Brinkman said he had to weigh that in his mind against the unconventional nature of the tweeted announcement.

In Tuesday’s round of testimony, three more men took the stand. Dave Arnold, currently the executive communications director at Meta, was senior communications director at Tesla in 2018, Steven Heston, a professor at the Robert H. Smith School of Business at the University of Maryland, also testified, as did Michael Hartzmark, a forensic economist.

While much of the testimony has dealt with what people knew at what particular point in the class period, that time between the release of the initial, earthshaking tweet and the collapse of the deal, much of Tuesday’s testimony dealt with fine detail matters.

Jurors, who have already taken in massive amounts of information about investing and securities law, heard long descriptions from Heston about the differences between straddle options and put options, and saw charts depicting market volatility on the day of the tweet.

While Heston breezily offered his testimony, the jury watched impassively, took notes, and paid attention to almost five hours of testimony arcane to anyone outside the world of finance. That breeziness paled, however, when defense attorney Adam Abensohn began his aggressive cross-examination.

As Heston explained his methodologies for analyzing the market reactions to Musk’s tweets, Abensohn picked them apart.

“Under one methodology, clients lost money following the tweets”, Abensohn said, “and under another, they made money?”

Heston replied that they were two different illustration and that one has to make different assumptions about the inputs. “These examples are not comparable,” he said.

While the expert witnesses took questions easily from the plaintiffs’ attorneys, Abensohn hit them hard, dissecting their statements, looking for errors in their math and methodologies.

Hartzmark told plaintiffs’ attorney Pirrott that he had reviewed thousands of publications for research, and pored over 2,400 records in his data base, in addition to 50 analysts’ reports, media reports, and internal documents. “I’m a data monger,” he told Pirrott proudly. His assessment of the impact of the tweets on the market was final.  

“I believe the tweets had an impact on the market,” he said.

But Abensohn was waiting for him as well, attacking his methodologies and even questioning Hartzmark’s use of the term “Musk’s tweets.”

That sent the defense team into a frenzy trying to locate the documents that Abensohn wanted to use for that particular line of questioning. But he wasn’t bowed and kept his combative questioning going. At times, the acrimony between Abensohn and Hartzmark became so clear U.S. District Judge Edward Chen had to step in and remind them not to talk over one another, as it was making it hard for the court reporter to keep up.

When Abensohn was done, like Heston before him, Hartzmark looked relieved.

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