More than four years after he said he received funding to take Tesla off the stock market, Elon Musk will try to defend that statement in a trial that began Tuesday in federal court in San Francisco.
The electric vehicle manufacturer’s chief executive, Mr. Musk has been sued by investors for failing to line up the money to take Tesla private and acting recklessly in discussing the concept. If the plaintiffs get a jury to rule in their favor, Tesla and Mr. Musk could also be forced to pay billions of dollars in damages.
Tesla’s stock rose after the tweet was published, but sank after the proposal failed. The plaintiffs, Glenn Littleton and other investors, are suing Mr.
Company, Mr. Musk and his lawyers have defended the post, saying it was not a reckless act.
Mr. Musk and Tesla settled a separate lawsuit filed by the Securities and Exchange Commission over his plan to take the company private. They paid a fine to the SEC, and Mr. Musk agreed to step down as Tesla’s chairman and have a lawyer review certain statements he made about the company on social media.
The investors’ case was filed in US District Court by Mr. The trial comes at a difficult time for Musk and Tesla. The company is selling fewer cars than executives promised and analysts expected, It forces Tesla to lower prices. Twitter’s revenue has plummeted Because Mr. Many companies are no longer running ads on the platform after Musk’s erratic behavior and his decision to lay off the majority of the company’s employees.
This case Mr. Legal experts said it could be tough for Musk and Tesla. Senior District Judge Edward M. Mr. Chen said last year that he was taking Tesla personally. Musk’s 2018 Twitter posts were false and, in the words of investors, Mr. about the truth when making deliberately irresponsible” statements.
University of Michigan law professor Adam C. Pritchard said: “You’ve already got summary judgment for negligence and misrepresentation. Those are two common defenses defendants have.”
However, Judge Chen did not side with the investors in other parts of their case – which could have given Mr Musk a path to victory. Plaintiffs lost money in Tesla stock, Mr. The court would have to show that Musk’s statements were tied to claims he received funding that was false, legal experts said.
Mr. Musk could win.
In court documents, his attorneys have pointed to statements they believe fit that description. For example, Mr. Alex Spiro, one of Musk’s lawyers, argued that the moves in Tesla’s stock could have been caused by his “uncertainly factual” announcement that he was “considering taking Tesla private.”
“Any ordinary defendant would settle this case, but he has something worth trying,” Mr. Pritchard said.
Tesla, Mr. Musk and Mr. Spiro did not respond to requests for comment.
Mr. While Musk has always struggled to show he has the funds to take on Tesla privately, he may seek to introduce new evidence and testimony in court in his favor. He said Saudi Arabia’s Public Investment Fund has agreed to provide financing.
Overseeing the Saudi financial Mr. Text messages between Musk and Yasir Al-Rumaian surfaced in court filings early last year. These news, Mr. Musk is shown asking about the financial commitment to the deal. Mr. Tesla did not provide enough information. Al-Rumayan replied.
“This is a very weak statement and does not reflect the conversation we had at Tesla,” Mr. Musk wrote in an August 2018 speech. “You said you were definitely interested in taking Tesla private and wanted to do so as early as 2016.”
“That’s your choice, Elon,” mr. Al-Rumayan replied. “We can’t approve something we don’t have enough information about,” he said later in the speech.
Mr. Musk’s legal team, Mr. It subpoenaed al-Rumai and other employees of the Saudi fund, seeking to compel them to testify at the trial. But attorneys for the fund said in court Thursday that the subpoenas were “legally flawed” and “frankly, frivolous.” The next day, Mr. Musk’s attorneys told the court they are no longer pursuing the subpoena.
A spokesman for Saudi Arabia’s Public Investment Fund did not respond to requests for comment.
Later in August 2018, Mr. Musk said in a blog post that Tesla will remain a public company.
The case harks back to a very different era for Tesla. In 2018, the automaker struggled a lot to ramp up production. Soon, the problems subsided and sales rose rapidly. The company began doing so well that many investors thought it would dominate the auto industry. Tesla’s market cap has surpassed $1 trillion.
But last year, investors reassessed the company’s prospects because of disappointing sales figures and Mr. Musk sold large amounts of stock to raise money for his acquisition of Twitter. Tesla’s stock price has fallen about 65 percent in the past year.
Mr. Musk and his lawyers have tried to delay the trial, including a request last week by Judge Chen to transfer the case to the Western District of Texas, which includes Austin, where Tesla will relocate its headquarters in 2021. Prosecutors argued that the local media. “Saturating the Bay Area,” Tesla’s former home, with “biased and negative stories about Mr. Musk” could prejudice jurors. Justice Chen on Friday rejected that request.
This is Mr. Not Musk’s only legal battle.
At the U.S. Court of Appeals for the Second Circuit, he is trying to block the portions The agreement he reached with the SEC In that appeal, Mr. Musk argues that the settlement’s provisions, which prevent his ability to make public statements about certain Tesla matters, intrude on his First Amendment rights.
In the Delaware Court of Chancery, Tesla is a shareholder Attempting to invalidate In 2018 Mr. Musk was awarded a large compensation package. A Delaware judge may announce a ruling in the coming weeks.