A trial is set to begin on Tuesday in a lawsuit over whether Elon Musk knowingly misled investors by claiming he had “funding secured” to take Tesla private in 2018.
Jury selection and opening arguments are expected on Tuesday in a federal court in San Francisco in the lawsuit brought against Musk, Tesla and Tesla’s board. The trial is scheduled to last about 10 days.
The investors who brought the lawsuit claim Musk manipulated Tesla’s stock price when he tweeted in August 2018 that he was considering taking the electric-car maker private at a price of $420 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 on Twitter, 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 and what he considered a “handshake” agreement to take the electric vehicle company off the public markets.
In an earlier ruling, US District Judge Edward Chen said jurors should consider Musk’s tweets reckless and false. Jurors will decide if Musk knowingly 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 already proven costly for Musk. He and Tesla each paid $20mn to settle legal action from the US Securities and Exchange Commission. Musk also had to resign as Tesla 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 64 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.
Musk’s legal team had previously sought to have the trial moved to Texas, where Tesla is now based. His attorneys argued that the San Francisco jury pool may be tainted due to recent activity concerning Musk’s management of Twitter, whose 7,500-strong workforce Musk has cut nearly in half since taking over.