Tesla investors lost $12 billion in 10 days as a result of Elon Musk’s famous tweet in 2018 that he had “guaranteed funds” to take the company private, witnesses testified at the CEO’s accountability hearing.
Musk’s lawyers say billions of dollars in damages are at stake in the lawsuit, now in its third week in San Francisco federal court. Testimony presented to jurors Tuesday by an expert witness for the plaintiffs aimed to show that Musk’s August 2018 Twitter posts sent Tesla shares on a roller coaster ride that hurt investors holding various positions, both long and short.
The loss figures were presented to the jury by Michael Hartzmark of Forensic Economics, who testified about how he measured the impact of Musk’s tweets on the price of Tesla’s securities. The estimated $12 billion applies to all Tesla investors, which is a larger group than those who are part of the class action lawsuit.
Hartzmark did not provide a basic number for the amount the plaintiffs are suing for, but he told jurors that Musk’s tweets had “disastrous consequences” for investors and applied a methodology to calculate the losses.
It was clear that the information Musk provided was “material,” or important to reasonable investors, as indicated by questions and concerns communicated in an email to the company’s investor relations office at the time, Hartzmark said.
They are walking the jury on how Tesla’s stock price rose in response to the initial announcement from Musk – then declined sharply as doubts grew about the take-private plan, partly fueled by public knowledge that the US Securities and Exchange Commission was investigating the tweets.
“Uncertainty is an investor’s kryptonite,” says Hartzmark. “When this drip, drip, drip over time will have a negative impact” on the stock price.
Andrew Rossman, a lawyer for Musk, asked Hartzmark to reluctantly admit under cross-examination that the first part of Musk’s tweet, that he “considered” taking Tesla private, was true. The judge handling the case had previously determined that the second part of Musk’s tweet, that he had “guaranteed funding,” was false.
Rossman asked whether Hartzmark examined the effect of the true portion of the tweet on Tesla’s stock price separately from the elements that had been ruled false.
“It’s an interwoven bundle,” Hartzmark replied. They evaluated them together, he said, because Musk had previously said he wanted to take Tesla private and that fact was reflected in Tesla’s stock price before the CEO’s tweet. The only new information in the 10-day period covered by the lawsuit was Musk’s claim that he had “guaranteed funds,” he said.
Earlier jurors heard from Steven Heston, a finance professor at the University of Maryland. Another expert witness for investors, Heston shared his research on what happened to Tesla’s options since August 7, 2018, when Musk sent tweets, more than 10 days ago, because the proposed plan to take the company private collapsed. They noted “sudden movements” in option prices during the period and “unprecedented” patterns in long-term option price volatility.
Heston showed jurors how the short-term call option expired a month after Musk’s tweet, with a strike price of $420 — the stock price at which Musk said Tesla would go private — up nearly $2. , lost $22.40.
Musk has testified that his “guaranteed funding” tweet was “absolutely true,” citing what he described as an “unclear” commitment by Saudi Arabia’s sovereign wealth fund to back billions of dollars in plans to go private — even though he had nothing to do with it. what. write.
Investors argue Musk’s tweets violate securities laws because bankers have barely been consulted and haven’t officially signed off on his personal plans. Investment banking witnesses told jurors last week that even a week after the tweet, they were still working to determine how the deal would be structured, including who would pay.
U.S. District Judge Edward Chen said when the court adjourned for the day that he expected the case to be sent to a jury on Friday.
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