Musk ‘lied’ when he tweeted about Tesla takeover, stakeholders’ attorney argues

Elon Musk could end up taking the stand as early as Friday in the ongoing San Francisco trial alleging that he deceptively drove up the price of Tesla Motors' stock by tweeting about a plan to take the carmaker private, which never came to pass.

As arguments began on Wednesday, the attorney for a group of shareholders charged that Elon Musk "lied" when he tweeted in 2018 that he had "secured" funding to take Tesla private. The case seeks to hold the firm's CEO responsible for "billions" investors say they lost after the claim drove up the share price.

While the plaintiffs portrayed Musk as a reckless liar who caused "regular people" to lose millions, the defense team for the tech billionaire painted him as a well-intentioned visionary, who merely used the "wrong words" in describing the deal.

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.

Littleton, a 71-year-old investor from Kansas City, Missouri, was the first witness called to the stand. He said Musk's claim about the financing alarmed him because he had purchased Tesla investments designed to reward him for his belief that the automaker's stock would eventually be worth far more than the $420.

He said he sold most of his holdings to cut his losses but still saw the value of his Tesla portfolio plunge by 75%.

"The damage was done," Littleton lamented. "I was in a state of shock."

The case may hinge on whether Musk knowingly drove up Tesla's share price with his 2018 tweets, saying he was securing funding to take the company private in what would have been a $72bn buyout. The stock collapsed a week later, when it became clear that he didn't have the financial backing to pull off the deal.

"Millions of dollars were lost when his lies were exposed," said Nicholas Porritt, lead attorney for the investors, before a jury in San Francisco on Wednesday in what is expected to be a three-week trial.

A jury of nine, seated on Tuesday, 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.

During Tuesday's jury selection, some potential jurors described the chief executive, who has gained a reputation for the unpredictable, as "narcissistic", "unpredictable" and "a little off his rocker".

But Musk's attorney Alex Spiro said the controversial chief executive was "serious" about the deal.

"You will come to learn very soon that this was not fraud, not even close," Spiro said during opening statements.

Musk believed that financing was not an issue and was "taking steps" to make a deal happen, Spiro said.

During cross-examination, a lawyer for Tesla's board of directors repeatedly questioned whether Littleton had legitimate reason to believe a buyout was inevitable, but the investor remained steadfast.

"'Funding secured' was the only thing that mattered to me," Littleton testified. "That was such a defining statement."

Edward Chen, the US district judge 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.

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 may testify.

Musk is on the witness list for both sides of the case. An attorney for the plaintiffs told the Associated Press he would try to call Musk to the stand when the trial resumes on Friday after some other scheduled witnesses or, if time doesn't allow, on Monday.

Musk's leadership of Twitter - which he purchased in April and promptly gutted, alienating users and advertisers - has proven unpopular among Tesla's current stockholders. They are worried that he has been devoting less time to the electric carmaker at a time of intensifying competition.

Those concerns contributed to a 65% decline in Tesla's stock last year that wiped out more than $700bn in shareholder wealth - far more than the $14bn swing in fortune that occurred between the company's high and low stock prices from 7 to 17 August, the period covered in the lawsuit.