Elon Musk will defend his claim that he obtained financing to take Tesla off the stock market more than four years ago in a trial that begins Tuesday in San Francisco federal court.
Investors brought the case claiming that Mr. Musk, the CEO of the electric car company, never actually raised the money for Tesla and was reckless in discussing the idea. Tesla and Musk could be subject to billions of dollars in damages if a jury rules in their favor.
The trial is focused on Musk’s words on Twitter, which he acquired in October. “I’m thinking of taking the Tesla private at $420. Financing secured,” he said. wrote in a postOn August 7, 2018,
Tesla’s share prices rose after the tweet was published, but plummeted after it was deleted. Glenn Littleton, the plaintiff, and other investors claim that Mr. Musk’s actions caused them to suffer losses in Tesla stock movements.
The company, Mr. Musk, and their lawyers defended the position and claimed it was not recklessness.
Tesla and Mr. Musk settled a separate suit brought by the Securities and Exchange Commission against him for his plan to take Tesla private. They have paid fines to Securities and Exchange Commission and Mr. Musk has agreed that he will resign as Tesla chairman and that an attorney will review any statements he makes on social media about the company before they are made public.
In a difficult time for Tesla and Mr. Musk, the lawsuit brought by investors will be heard in US District Court. Analysts predicted that the company would sell fewer vehicles than expected. Forcing Tesla to cut prices. Twitter revenue fellMany companies have stopped placing ads on the platform due to Mr. Musk’s erratic behavior, and his decision of firing a large number of employees.
Legal experts warned that the case could prove to be difficult for Mr. Musk as well as Tesla. Edward M. Chen, the senior district judge in the case, ruled last summer that he had agreed with plaintiffs that Mr. Musk’s 2018 tweets about Tesla becoming private were false and that Mr. Musk, in the words investors, was “willfully reckless” about Truth when he made these statements.
“I really got summary judgment for recklessness and false statement,” said Adam Pritchard, a professor of law at the University of Michigan. “These are the most common defenses that defendants can use.”
However, Judge Chen has not taken the side of the investors in other parts of their case — and that could give Mr. Musk a path to victory. Legal experts stated that plaintiffs need to prove that the money they lost from Tesla stock was due to a false statement by Mr. Musk. This includes the claim that he obtained the financing.
If Mr. Musk is found to have made other statements which were true and that they caused movements in Tesla stock, he could be found guilty.
His attorneys cited statements that they believe to fit that description in court documents. Alex Spiro (one of Mr. Musk’s lawyers) stated that the movements in Tesla stock might have been caused his “indisputably right” statement that “he was considering taking Tesla private.”
“Any ordinary defendant would settle the case,” stated Mr. Pritchard. “But he has something worthwhile trying.”
Tesla, Mr. Musk, or Mr. Spiro have not responded to requests for comment.
Musk has never been able to prove he has enough money to take Tesla private. However, he may present new evidence and testimony to support him in court. He confirmed that funding was provided by the Kingdom of Saudi Arabia’s Public Investment Fund.
Court files containing text messages between Mr. Misk, Yasser AlRumayyan, who oversees Saudi fund, and Mr. Misk were found in the early part of last year. These letters show Mr. Musk asking about Saudi fund’s commitment to the deal. Al-Rumayyan responded that Tesla had not provided enough information.
Musk wrote in August 2018 a text message that “This is an extremely weak statement and doesn’t reflect the conversation at Tesla.” Musk sent a text message to Musk in August 2018. He wrote, “You stated you were interested and have been wanting to take Tesla private since 2016”
“It’s up you, Elon,” replied Mr. AlRumayyan. He added, “We can’t accept something we don’t know enough about.”
Mr. Misk’s legal staff summoned Mr. Al-Rumayyan as well other employees from the Saudi Fund to force them to testify during trial. Lawyers for the fund said Thursday that the subpoenas were ‘legally flawed’ and ‘frankly, frivolous. The lawyers for Mr. Musk told the court the next day that they would no longer be pursuing subpoenas.
A spokesperson for the Saudi Public Investment Fund declined to comment on requests.
Later, in August 2018, Musk posted a blog post stating that Tesla would still be a public corporation.
The lawsuit dates back to a different time for Tesla. The automaker has been trying hard to increase production since 2018. The problems soon subsided and sales soared quickly. Many investors believed that Tesla would be the dominant player in the auto industry. Tesla’s market capitalization is now over $1 trillion.
Investors have reevaluated the company’s prospects over the past year after it reported disappointing sales figures and Mr. Musk sold large quantities of stock to raise funds for his Twitter acquisition. The share price of Tesla has fallen by approximately 65 percent over the past year.
His attorneys and Mr. Musk have attempted to delay the trial. They requested last week that Judge Chen transfer it to the Western District of Texas. This includes Austin, where Tesla’s headquarters will be located in 2021. According to the lawyers, local media has “satiated the Bay Area, Tesla’s home.” The former, with “biased stories and negative stories about Musk” that could harm jurors. Judge Chen denied this request Friday.
This isn’t Mr. Musk’s only legal fight.
He is attempting to end parts of the United States Court of Appeals, Second Circuit. The agreement he reached with the SECMusk appeals that settlement provisions that restrict his ability to make public statements regarding certain Tesla matters violate his First Amendment rights.
A Tesla shareholder was also represented in Delaware Chancery tries to invalidateIn 2018, Mr. Musk received a huge compensation package. In the coming weeks, a Delaware judge could issue a ruling.
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