STORY: Jury selection kicked off in a San Francisco federal court, Tuesday, in a case brought by Tesla shareholders who claim Tweets by Elon Musk amounted to fraud.
The main focus – a 2018 Tweet from Musk reading: “Am considering taking Telsa private at $420. Funding secured.”
Shareholders have said Musk’s tweets cost investors ‘billions.’
The lawsuit seeks unspecified damages for shareholders who bought or sold Tesla stocks in the days after Musk’s Tweets on August 7, 2018.
“When the stock price rose after the news, they allegedly bought. Then it collapsed when the truth came out. They claim that that was fraud.”
Professor of Law at UC Berkeley, Robert Bartlett, says the case is unique:
“I think the deck is probably stacked against Musk, given that the judge has already ruled that it was a false statement.”
“The main issue for the jury is going to be whether it was material, which legally can be thought of as 'was this the type of false statement that investors would actually act on?' And the primary defense is going to be that, well, he said he was also considering taking Tesla private, which was true. And maybe that's why the stock price moved so much that day. That's why investors were were buying Tesla shares that day.”
The defendants, who also include seven current and former Tesla directors, have denied wrongdoing.
“Well, the liability of the directors is going to depend on two things. One of them is going to be whether or not they controlled Tesla and whether they could control Musk as the chief executive officer of Tesla. And the second one is going to be whether they, if that's the case, whether they can claim that they acted in good faith and shouldn't be liable because they couldn't actually control his particular actions."
"I think Musk is the heart and lungs of Tesla.”
Managing Director of Wedbush Securities, Daniel Ives, says the trial will ultimately hurt Tesla’s brand:
"Musk fighting this in court, I think, is a disastrous scenario because this was a black eye moment that now just gets more and more of a spotlight, something investors want to put in the rearview mirror."
According to court documents, Musk could take the stand. Oracle co-founder Larry Ellison and James Murdoch – son of Rupert Murdoch – may also do the same.
The trial could last about three weeks.