SAN FRANCISCO, Jan 20 (Reuters) – Elon Musk, chief executive of Tesla Inc (TSLA.O), will likely be called to testify on Friday in a jury trial over his 2018 Twitter post that he had “secured financing” to take the electric carmaker private, which shareholders say has cost them millions in business losses.
The class action lawsuit in federal court in San Francisco has resumed with investor Timothy Fries telling the jury how he lost $5,000 buying Tesla stock after Musk sent the tweet to the center of the lawsuit.
Musk, known for his combative testimonies, is expected to explain why he insisted on a Saudi investor backing the deal, which was never done, and whether he knowingly made a materially misleading statement with his tweet.
The case is a rare securities class action lawsuit and the plaintiffs have already cleared significant legal hurdles, with U.S. Judge Edward Chen ruling last year that Musk’s post was misleading and reckless.
Shareholders alleged that Musk lied when he sent the tweet, which cost investors dearly.
Fries told the jury that the funding obtained meant to him “that there had been a verification, a critical examination of these sources of funding”.
Musk’s attorney, Alex Spiro, told the jury in his opening statement on Wednesday that Musk believed he had funding from Saudi backers and was taking steps to complete the deal. Fearing media leaks, Musk tried to protect “the ordinary shareholder” by sending the tweet, which contained “technical inaccuracies”, Spiro said.
Harvard Law School professor Guhan Subramanian told the jury that Musk’s behavior in 2018 lacked the hallmarks of a traditional corporate deal by tweeting his interest in Tesla without proper financial or legal analysis.
“Compared to the standard model, this is an extreme outlier,” said Subramanian, who called Musk’s approach “unprecedented” and “inconsistent.”
A nine-person jury will decide whether the tweet artificially inflated Tesla’s share price by playing on the status of the deal’s financing, and if so, by how much.
The defendants include current and former Tesla executives, who Spiro said had “pure” motives in their response to Musk’s plan.
Reporting by Tom Hals in Wilmington, Delaware, and Jody Godoy in San Francisco; Editing by Noeleen Walder, Peter Henderson, Matthew Lewis and Daniel Wallis
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