Elon Musk tweet cost Tesla investors US$12 billion, jury told in class-action lawsuit
- The US$12 billion estimate applies to all Tesla investors, which is a larger group than those who are part of the lawsuit
- Musk has testified that his tweet to have secured funding to take Tesla private was true, claiming a commitment by Saudi Arabia’s sovereign wealth fund
Lawyers for Musk have said there are billions of dollars in damages at stake in the trial, now in its third week in San Francisco federal court. Testimony presented to jurors on Tuesday by expert witnesses for the plaintiffs was aimed at showing that Musk’s August 2018 Twitter posts sent Tesla’s stock on a roller-coaster ride that hurt investors who held a variety of positions, long and short.
The loss figure was presented to the jury by Michael Hartzmark of Forensic Economics, who testified about how he measured the impact of Musk’s tweets on the prices of Tesla securities. The US$12 billion estimate applies to all Tesla investors, which is a larger group than those who are part of the class-action lawsuit.
Hartzmark did not offer a bottom-line number for how much the plaintiffs are seeking in damages, but he told the jury that Musk’s tweets did “consequential harm” to investors and laid out his methodology for calculating losses.
It was clear the information Musk conveyed was “material”, or important to reasonable investors, as shown by the questions and concerns communicated in emails to the company’s investor relations office at the time, Hartzmark said.
He walked jurors through how Tesla’s share price spiked in response to the initial announcement from Musk – and then declined sharply as doubts grew about the take-private plan, in part fuelled by public knowledge that the US Securities and Exchange Commission was investigating the tweets.
“Uncertainty is the kryptonite of investors,” Hartzmark said. “As this went drip, drip, drip over time it would have a negative impact” on the share price.
Andrew Rossman, a lawyer for Musk, got Hartzmark to reluctantly acknowledge on cross examination that the first part of Musk’s tweet, that he was “considering” taking Tesla private, was true. The judge handling the case has previously determined that the second piece of Musk’s tweet, that he had “funding secured”, was false.