Elon Musk’s Tesla Twitter Trial Deepens Investor Damages

SAN FRANCISCO (AP) – A tweet by Elon Musk claiming he had the funding to take Tesla private in 2018 caused billions of dollars in damages to investors after the deal fell through, according to estimates filed Tuesday in a lawsuit examining the random management of the acquisition proposal.

The jaw-dropping estimates presented by two experts hired by lawyers representing Tesla shareholders underlined the challenges facing a nine-person jury as the three-week trial concludes this week. U.S. District Judge Edward Chen plans to turn the case over to the jury on Friday.

Depending on the verdict, Musk and the electric carmaker he runs could face further financial fallout for his erratic behavior on the Twitter platform, which he now owns. Without acknowledging any wrongdoing, Musk and Tesla reached a $40 million settlement with securities regulators after Musk’s annoying tweets in August 2018.

In this class action lawsuit on behalf of Tesla shareholders, jurors must first determine whether two tweets Musk abruptly posted on Aug. 7, 2018 set Tesla investors in the wrong direction. If the jury decides to hold Musk accountable for tweets that Chen has already found to be false, they will be faced with what may be an even more formidable task: trying to calculate how much Musk — one of the richest people in the world — and Tesla should get. pay for misleading tweets.

One of two pundits on Tuesday, economist Michael Hartzmark, examined a report studded with terms like “but-for” and “consequential inflation” that justified calculating the damages Tesla shareholders suffered during a 10-day period in the August 2018 to anywhere from $4 billion to $11 billion, or $22.55 to $66.67 per Tesla share at the time.

Another expert, University of Maryland finance professor Steven Heston, looked into an even more dense report analyzing the impact of Musk’s tweets on more than 2,000 types of Tesla stock options, drawing largely on a known formula. as a Black-Scholes model widely used by companies to evaluate executive compensation packages.

When pressed by a lawyer for Musk about the reliability of his model, Heston acknowledged, “All models deviate from reality, which is why they are models.”

Heston, who said he was being paid $300,000 to $350,000 for his work in the case, hesitated to try to make a concrete estimate of the investor’s damages, saying it was work for jurors.

The crux of the case hinges on an Aug. 7, 2018 tweet in which Musk said “Financing guaranteed ” to take private Tesla. Musk abruptly posted the tweet minutes before boarding his private jet after being alerted that the Financial Times was about to publish a story that Saudi Arabia’s Public Investment Fund had spent about $2 billion buying a 5% stake in Tesla to diversify its interests beyond oil, according to his testimony.

Amid widespread confusion about whether Musk’s Twitter account had been hacked or was joking, Musk followed up a few hours later with another tweet suggesting that a deal was imminent.

During about eight hours of sworn testimony, Musk repeatedly insisted that he cared for shareholder interests and believed he had a financial commitment from the Saudi fund that was retracted after his “financing secured” tweet. Musk also testified that he could still have made the takeover by raising cash from other investors and selling part of his stock in SpaceX, a rocket maker he founded.

After consulting with Tesla’s major shareholders, Musk has decided that the electric carmaker should remain public, a decision that has paid off for him and other investors. Tesla’s shares are now worth more than eight times what they were at the time of Musk’s takeover tweet, after adjusting for two stock splits that have occurred since then.

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