Four years ago, Elon Musk tweeted that he was going to take Tesla out of the stock market. The whimsical billionaire must now be accountable in court to investors who feel aggrieved by his statements. “Elon Musk, (then) CEO of Tesla, lied, and his lies caused people to lose millions of dollars,” said Nicholas Porritt, attorney for the plaintiffs, investors brought together in a class action.
On August 10, 2018, they filed a complaint against the business executive for having “artificially manipulated the price of Tesla’s stock in order to completely ruin investors” who were betting on the price drop. The fraud trial opened Tuesday in San Francisco with the selection of a nine-person jury, and is expected to last three weeks. Elon Musk himself is due to take the stand, possibly as early as Friday.
A tweet written “hastily”
The case dates back to the summer of 2018. The entrepreneur had created amazement on August 7 by saying that he wanted to withdraw his group from the stock market by paying 420 dollars per share, then that the financing was “secured”. A few days later he indicated that he was in discussion with the Saudi sovereign fund in particular.
According to the defense, Elon Musk had every intention of taking the automaker out of the stock market, and had no doubts about the financing, thanks to assurances from this fund. Alexander Spiro, the billionaire’s lawyer, admitted that his client had written this tweet “in a hasty way”. The choice of words was “reckless”, but “it is not a fraud”, hammered the lawyer.
Tesla shares jumped to $386.48 in the wake of the tweets. By August 16, it was down to $335.45. That same day, the New York Times had published an interview with Elon Musk “which confirmed the worst rumours”, argued Nicholas Porritt, in particular that “no one on the board had reread the tweets composed from his car on the way for the airport, and that the price, 420 dollars, was a joke”.
“It was no joke for investors”
In the United States, the numbers 4 and 20 together are associated with cannabis use. “I can tell you that it was no joke for investors,” asserted Nicholas Porritt. Glen Littleton, the main plaintiff, told the jurors how Elon Musk’s sensational announcement had almost “annihilated” all of his investments. According to his lawyer, this case is also important because it concerns the respect of the laws which govern the financial markets – markets on which depend in particular the pension funds and insurance companies.
Tesla had quickly abandoned the idea of delisting. But the American stock market policeman, the SEC, believing that the boss had not provided proof of his financing, had forced him to cede the presidency of the board of directors, to pay a fine of 20 million dollars and demanded by the that his Tesla-related tweets be pre-cleared by a competent legal practitioner.
The intervention of the authorities did not moderate his appetite for provocations on his favorite social network, which he bought in October after months of twists and turns and under the threat of a lawsuit.