A group of nine jurors were due to hear opening arguments on Wednesday in a trial over Elon Musk’s tweets claiming he had “funding secured” to take Tesla private in 2018.
The class action lawsuit was brought by investors who allege Musk artificially boosted Tesla’s stock price when he wrote on Twitter in August 2018 that he was considering taking the electric-car maker private at a price of $420 (€389) a share and had financing in place to do so. A deal never materialised. Shareholders allege the posts ultimately caused them significant financial losses as Tesla shares whipsawed in response.
Musk argues his posts, which prompted Tesla’s stock price to jump sharply and end the day 11 per cent up, were based on conversations with backers from Saudi Arabia’s Public Investment Fund (PIF) and what he considered a “handshake” agreement to take the company off the public markets.
Opening statements had been expected to begin on Tuesday, but US District Judge Edward Chen in San Francisco acknowledged jury selection had taken longer than anticipated as both sides in the case debated prospective jurors’ neutrality.
Earlier in the case, Musk’s attorneys had unsuccessfully sought to move the trial from California to Texas, where Tesla is now based, amid concerns that the jury pool in San Francisco would be tainted due to discontent around Musk’s recent management of Twitter, which included cutting its 7,500-strong workforce nearly in half.
During the selection process, one prospective juror had described Musk as “arrogant”, “unpredictable” and “irrational at times”. Another said: “I think he’s a little off his rocker.” Ultimately, a nine-member jury was selected, comprising seven men and two women.
The trial is scheduled to last about 10 days.
In an earlier ruling, Chen said jurors should consider Musk’s tweets reckless and false. Jurors will decide if he knowingly and materially misled investors and, if so, whether the plaintiffs are owed any damages.
The extensive potential witness list includes Musk; members of Tesla’s board, its chief financial officer and head of investor relations; and Silicon Valley figures such as Silver Lake managing partner Egon Durban, and Oracle co-founder and Musk confidant Larry Ellison.
Musk’s legal team is also seeking testimony from the head of Saudi Arabia’s sovereign wealth fund, Yasir al-Rumayyan, and several other PIF figures, to testify at the trial. PIF has filed a motion to block the request, arguing that the San Francisco court does not have the jurisdiction to compel the Saudi executives to appear.
Earlier court filings showed how the relationship between Musk and al-Rumayyan quickly deteriorated over text messages when media reports on the go-private discussions began circulating.
The “funding secured” tweet has proven costly for Musk. He and Tesla each paid $20 million to settle legal action from the US Securities and Exchange Commission. Musk also had to resign as the carmaker’s chair, although he kept his position as chief executive.
The legal showdown comes amid a period of severe market turbulence for Tesla. The company’s share price has fallen 61.7 per cent over the past 12 months, as demand for its cars has softened. Some investors also believe that Musk’s recent purchase of Twitter has left the 51-year-old chief executive heavily distracted. – Copyright The Financial Times Limited 2023
