Tesla CEO Elon Musk was on his way to the airport in August 2018 when he made a "split-second decision" to tweet that he was "considering" taking the company private with "funding secured" because he'd just read a news article revealing that Saudi Arabia was investing heavily in the electric-car maker.
That's the defense his lawyer presented on Wednesday to a jury that will decide whether the billionaire entrepreneur defrauded Tesla investors of billions of dollars because they placed big bets on a tweet that turned out to be false.
"He decided in that rushed moment, imperfect or not, that disclosure was a better course," Alex Spiro, Musk's attorney, told jurors in his opening argument in San Francisco federal court. "He didn't want there to be a leak."
Musk's intention to take Tesla private was "indisputably true," and the messages on Twitter "didn't materially matter to the market," Spiro said. In fact, he said, when details of the plan were revealed in a meeting following the tweet, Tesla's stock price went up.
In sharp contrast, a lawyer for Tesla shareholders portrayed the Aug. 7, 2018, tweet and follow-up messages from Musk and the company as "lies" that caused ordinary investors to lose millions of dollars.
For markets to operate normally and fairly, it's "critical that he is held, and the company is held, liable," attorney Nicholas Porritt said.
The dueling arguments set the stage for a two-week trial that will put Musk's credibility on the line - and which could cost him, Tesla and the company's board billions of dollars if they lose.
As the star witness, Musk is expected to testify that his short-lived plan to take Tesla private was solid based on discussions he had with Saudi Arabia's sovereign wealth fund.
Porritt argued that Musk actually had no deal in place for what would have been a $60 billion transaction, and that the initial tweet was sent without advance notice to Tesla's board or any funding commitment. He described how the stock price initially "exploded" in response to Musk's tweet and crashed the following week after a New York Times story revealed the take-private plan was hollow.
To show jurors the tweets caused damage, Porritt called as a witness a 71-year-old self-employed investor and Tesla supporter from Kansas City, Missouri, who testified that the sudden revelation that the company was going private forced him to liquidate his positions. Glen Littleton, who is also the lead named plaintiff in the lawsuit representing hundreds of other investors, lost $3.5 million as a result, according to court filings.
"I couldn't afford to stay in," Littleton told jurors.
But Musk's team was able on cross-examination to put some dents in Littleton's testimony. He was forced to admit he'd started investing in Tesla in 2012 - three years earlier than he testified under his own lawyer's questioning.
Spiro devoted his opening argument to making Musk's actions sound harmless, telling the jury that "inaccuracies and vagueness in tweets didn't matter to markets. He was actively pursuing taking Twitter private."
"This was not fraud, not even close," he said.
The CEO's lawyer told the jury that leading up to Aug. 7, 2018, Musk talked to Michael Dell, as well as investors at Silver Lake Management and Goldman Sachs Group. "Mr. Musk was doing his homework," Spiro said, and in those conversations, the structure of a deal to take Tesla private might have been unique but funding wasn't an issue, Spiro said.
The Saudi investment fund hadn't heard a word of his intentions, Spiro said. "He didn't need to talk to them," he said. On the morning of Aug. 7, Saudi Arabia was making the news with a major stake in Tesla that broke in the Financial Times, he said, adding that Musk's tweet was a reaction to that news.
It was an effort to get the "state of play out to the world," Spiro said, calling the tweets "a thought bubble" about what Musk was considering. "Considerations aren't certain, everybody knows that."
WASHINGTON POST