Tesla (TSLA) CEO Elon Musk is expected to be called to testify as soon as Friday in a federal trial in California of a Tesla shareholder settlement. Claims Billions of dollars in damages to Musk and the company’s board of directors.
Tesla shareholders launched their case head on Wednesday, following opening statements from Musk’s lawyers that offered the Tesla chief’s defense of Tweet 2018saying he had secured “financing secured” to take the electric car company private.
On Friday, New Jersey resident Timothy Fries, the second of two Tesla stockholders, was called to testify to the stand. Fries said relying on Musk’s tweet caused him to lose about $5,000 in Tesla stock transactions.
“I assumed Elon was speaking on behalf of the board,” Fries said of Musk’s claim that he secured financing to take Tesla private. Fries said he invested about $18,000 in Tesla in his Aug. 7, 2018 tweet, then sold it at a loss when the deal didn’t go through.
Upon cross-examination, Fries admitted that despite the tweet, he understood that the Tesla private takeover deal had not been finalized.
“I knew it was still under negotiation,” he said in response to questioning from Musk’s lawyer.
The class of Tesla shareholders filing the lawsuit alleges that Musk’s August 7, 2018 tweet about the financing was false and therefore violated US securities laws. They argue that they relied on the validity of the information, resulting in trading losses over a 10-day period beginning on the day of the tweet.
Shareholders say the new information in the tweet caused Tesla’s stock price to soar because the $420-a-share offer Musk tweeted represented a 20% premium to its trading price. Then the arrow dropped to the bottom where it was before the tweet. (Since then, Tesla shares have been split into two shares and current deals About $129 a share.)
“These tweets are off-the-record and sporadic thoughts,” Alex Spiro, Musk’s attorney, told jurors Wednesday about the private acquisition deal that never materialized. Musk’s choice of word may have been reckless, Spiro said, though the tweet reflected a “quick decision” to benefit — rather than harm — investors.
According to Spiro, at the time of the tweet, Musk had already held a series of private meetings with executives from Saudi Arabia’s Public Investment Fund. He said fund executives agreed in a handshake deal to buy Tesla private at $420 per share.
That commitment, Spiro said, prompted Musk on August 2 to email Tesla’s board of directors an “informal” private offer to take over the company at that price. He added that the offer placed Musk as a counterparty to his managers.
“It was more than just thinking about ‘making Tesla private,'” Spiro told the jury about Musk’s thought process in crafting the tweet. “He was the bidder.”
However, on August 7, Musk’s liability to Tesla shareholders changed hands, Spiro said, when a report in the Financial Times cited an anonymous source. open What Musk already knew – that Saudi Arabia had bought shares on the open market, making the sovereign wealth fund a major shareholder in Tesla.
Spiro told the jury that knowing he had previously been involved in non-public conversations with the fund and that shareholder information should not be selectively disclosed to shareholders, Musk suddenly tweeted the possibility of a private takeover.
Spiro went on to say that everyone who was in the room at the time the Saudi fund committed to taking private Tesla would support the agreement, and that the responsible fund executive agreed to “do what needs to be done” to privatize Then you struggle EV company.
Address Spiro A August 7, 2018 Subsequent tweet From Musk, who reaffirmed his position, “secure financing” and said that only shareholder approval is required to close the deal, also on the same day Blog entry that provided additional details about the contingencies on Tesla’s website.
the Articles He explained that Tesla has not yet made a final decision on the private acquisition deal. Spiro downplayed the word “only” in Musk’s secondary tweet, saying the market’s lack of response to Tesla’s blog post shows Musk’s tweets didn’t move often volatile stocks.
“These tweets … mattered to the plaintiffs’ lawyers. They were not of interest to the market,” Spiro said.
The shareholder’s first witness, class representative Glenn Littleton, stood on Wednesday after both sides made opening statements.
Littleton testified that he liquidated his call and put options on Tesla as soon as he became aware of Musk’s initial tweet.
When he saw the words “funding secured,” he said, he began abandoning his positions because he ran out of money at Musk’s advertised price of $420 to the public. Littleton said both sets of his options would quickly drop to $0 if the deal went through.
In a separate case brought by the US Securities and Exchange Commission in response to the funding tweet, Musk and Tesla It’s settledThey each pay a $20 million fine. Musk also agreed in the agreement to step down as Tesla chairman and for Tesla’s general counsel to review potential “material” tweets before they are published. Musk is currently seeking to dissolve this part of the settlement.
Musk is expected to testify after testimony from the shareholder’s expert witness, Harvard Law School professor Gohan Subramanian.
Alexis Keenan is Legal Correspondent for Yahoo Finance. Follow Alexis on Twitter @tweet.
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