These are two sentences that could cost him dearly. More than four years after tweeting that he was going to take Tesla out of the stock market, Elon Musk must be held accountable in court by investors who feel aggrieved by his statements, after having already suffered the wrath of the authorities.
“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.
Elon Musk expected at the stand
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.
He had created a stupor on August 7, 2018 by saying that he wanted to withdraw his group from the Stock Exchange 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 Tesla 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 wrote the tweet “in a hurry” after a Financial Times article revealed that the Saudi fund had invested in Tesla.
” Joke “
The choice of words was “reckless”, but “it is not a fraud”, hammered the lawyer. “During this whole process, Mr. Musk did not sell a single share. No Tesla executive, no board member has sold a single stock. In real cases of fraud, people (…) want to take advantage of it, ”he insisted.
The title of the electric car manufacturer had jumped up to 386.48 dollars in the wake of the tweets. By August 16, it was down to $335.45.
On this date, 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 to the airport, and that the price, 420 dollars, was a joke”. In the United States, the number “four twenty” is associated with the consumption of cannabis. When the billionaire offered to buy Twitter last spring, he chose a price of $54.20 per share.
In the crosshairs of the stock market policeman
“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 following that his tweets directly related to the activity of Tesla are pre-approved by a competent lawyer.
“Elon Musk sees this lawsuit as a way to have this decision of the SEC re-examined”, comments Josh White, former economist of the federal agency. “He thinks he did nothing wrong and he has the right to say what he wants on Twitter.”