By Jody Godoy
SAN FRANCISCO (Reuters) -Tesla Inc CEO Elon Musk “lied” when he said that funding was “secured” to take the company private, a lawyer for Tesla (NASDAQ:TSLA) investors said on Wednesday, as an attorney for Musk argued that the billionaire merely used the “wrong words” when he tweeted about his plans in 2018.
Tesla investor Glen Littleton is seeking damages on behalf of shareholders who traded the company’s stock in the days after Musk posted his plan to take the company private on Twitter in August 2018.
Musk’s alleged lies caused “regular people” to lose millions, Nicholas Porritt, lead attorney for the investors, told a jury in San Francisco during opening statements.
“Millions of dollars were lost when his lies were exposed,” he added.
Musk’s lawyer disputed this characterization, saying that the billionaire was “serious” about taking the company private in 2018, but ultimately encountered shareholder opposition.
“You will come to learn very soon that this was not fraud, not even close,” Alex Spiro said during opening statements.
Musk believed that financing was not an issue and was “taking steps” to make a deal happen, Spiro told the jury.
While the tweets contained “technical inaccuracies,” Musk was concerned that some investors knew about his go-private plan and wanted to get the information out to the “everyday shareholder” that he “wanted to protect,” Spiro said.
“In a rush, he used the wrong words,” he said.
The case is a rare securities class action trial, and Musk and his company are bucking the norm of settling claims that clear high legal hurdles, making for a potentially dramatic trial at which Musk himself is expected to take the stand as early as this week.
A jury of nine will decide whether the tweets artificially inflated Tesla’s share price by playing up the status of funding for the deal, and if so, by how much.
The defendants include current and former Tesla directors, whom Spiro said had “pure” motives in their response to Musk’s plan.
Testimony concluded on Wednesday after nearly three hours from the first witness, Littleton. The trial will resume on Friday with an expert witness and might include Musk taking the stand.
Littleton said he began investing in Tesla in 2015 as Musk was “bringing new ideas to life” in the technology industry.
The self-employed investor said he viewed Musk’s “funding secured” statement as “absolute.”
Littleton said he scrambled to unwind his Tesla options positions, which the tweet made unprofitable.
On cross-examination, William Price, who represents the defendants, sought to show Littleton was motivated by Musk’s bid to take Tesla private, and not on “funding secured,” which is what the lawsuit challenges as fraudulent.
U.S. District Judge Edward Chen, who is overseeing the trial, has ruled that Musk’s statements about the status of the deal were false and Musk made them recklessly. The deal did not happen.
While shareholders sue hundreds of companies and their executives for alleged securities fraud every year, very few of those cases make it to trial. The vast majority are either dismissed by courts or settle.
Not among the jurors selected on Tuesday were some critics of Musk, such as one potential juror who said the chief executive, who has gained a reputation for the unpredictable, was “a little off his rocker.”