Opening arguments began Wednesday in a lawsuit pitting Tesla against shareholders accusing the company of misleading them over a tweet by Elon Musk claiming he had «secured» funding to take the electric car company private.
A lawyer for Tesla investors told a nine-person jury that Musk «lied» when he sent the Aug. 7, 2018, tweet, costing investors money as its share price fluctuated as Wall Street digested. information. Ultimately, the company remained publicly traded.
«Millions of dollars were lost when their lies were exposed,» said attorney Nicholas Porritt, who represents the investors.
A lawyer for Musk argued that the billionaire simply used the «wrong words» and that Musk was «serious» about taking the company private in 2018 with the help of Saudi Arabia’s public investment fund, but was ultimately met with opposition from shareholders. .
Major shareholder plaintiff Glen Littleton is seeking billions of dollars in damages for the 2018 tweet. Tesla’s shares began a steady decline that continued into the following year.
The fallout led to an investigation by federal regulators. Musk and Tesla were separately fined $20 million, and Musk was forced to resign as Tesla’s chairman. He also agreed to the requirement that lawyers review his statements about Tesla before posting them on social media.
Last May, Judge Edward Chen, who is overseeing the trial, granted Littleton and the other plaintiffs summary judgment that Musk’s comments about the private deal were untrue and reckless. A Northern California jury will now determine whether Musk knowingly made the false statement, how the tweet affected the share price and damages.
“Everything is aligned for the plaintiffs to win here,” said Minor Myers, who teaches corporate law at the University of Connecticut, told Reutersadding that the May ruling means shareholders are «starting with base runners.»
The case is unusual in that most securities class action lawsuits are dismissed or settled out of court. Hundreds of U.S. securities class action lawsuits have been filed each year since current laws governing the cases took effect in 1996, but only 15 have resulted in trial verdicts, according to data from law firm Wolf Popper LLP cited by Reuters.
If shareholders ultimately prevail and win damages, it will likely be years before they can collect due to the appeals process, experts said.
It is unclear if Musk himself will testify. Other people with ties to Tesla, including Larry Ellison, a former board member and co-founder of Oracle Corp.; and James Murdoch, a current board member and son of media mogul Rupert Murdoch, can also testify.