Jury selection began Tuesday in a trial to determine whether one of Elon Musk’s famous tweets violated US securities laws.
The lawsuit comes after Tesla shareholders sued Musk and Tesla’s board of directors in 2018, alleging that Musk illegally shared information about it on Twitter. financial security was provided the electric car company should be privatized. According to shareholders, Musk’s post artificially manipulated Tesla’s stock price.
“I’m thinking of buying a Tesla at $420. Funding secured,” Musk said in a post dated August 7, 2018. On the same day, he continued: “Investor support confirmed. The only reason it’s not certain is because it depends on a shareholder vote.”
On Tuesday, Senior Federal Circuit Judge Edward Chen, as well as lawyers for Musk and Tesla’s board and a group of Tesla shareholders, questioned prospective jurors about their ability to serve impartially in a class-action lawsuit filed in San Francisco District Court.
“If I’m sitting on the edge of history, I’d like to be there if possible,” one male juror told Chen. “It covers a lot of things: social media, big corporations, securities.”
The shareholders’ claims are similar to those Musk previously defended against the Securities and Exchange Commission. About two months after the posts, Musk and Tesla settled with the agency for a combined $40 million civil penalty. In addition, Musk agreed to step down as Tesla’s chairman and to have his future tweets reviewed before publication by Tesla’s general counsel.
Some securities lawyers see Musk’s defense as a difficult defense because last year, Judge Chen ruled in favor of shareholders, saying Musk’s statement about the financing was false and a reckless disregard for the truth.
For his part, Musk contends that none of the statements in question were “materially false” — a requirement to win the plaintiffs’ claims — and that he was actually considering buying Tesla for $420 per share. Musk also claims that a subsequent blog post on Tesla’s website disclosing additional information about the potential private transaction shows that Musk did not make material misrepresentations.
The group of shareholders represented in the civil suit either bought or sold Tesla stock during the class period from the date of Musk’s tweets to Aug. 17. The group is seeking unspecified damages.
Initially, the price of Tesla’s stock (pre-split) rose from an opening price of $343.84 per share on August 7, 2018 to $387.46 during the day. The stock closed at $352.45 per share on August 9, 2018. Trading volume also increased on August 7, more than double the stock’s average daily trading volume over the previous 90 days.
According to NERA Economic Consulting, a significant number of shareholder lawsuits are dismissed or settled before reaching the class certification review stage. In 2021, the group reported that 239 shareholder-related cases were resolved, with 153 being dismissed and 86 resolved by settlement.
Nevertheless, the case is moving forward as the judge questioned potential jurors on Tuesday. Judge Chen previously denied a request by Musk’s attorneys to move the trial to Texas, citing concerns about the impressions of local San Francisco-area jurors about Musk.
Apparently, the judges have mixed opinions about the billionaire.
A night-shift juror described Musk as having a “malicious” personality because he is “willing to take risks … that’s my image of him.”
Another described Musk as a “fast-rising businessman,” while a second potential juror said the billionaire was a “smart, successful pioneer.”
Others offered more unfavorable offers.
“I don’t think he’s a very likable person,” one juror wrote in an inquest of the Tesla CEO. He added that most of his ideas were based on Musk’s acquisition of Twitter. “He just seems arrogant and narcissistic… I’m not saying he is, but that’s how he comes off in some interviews.”
When Judge Chen asked her if she could act as an impartial juror, the woman said, “Many people are not necessarily lovable people… sometimes I don’t like my husband.”
In a separate questioning, Judge Chen addressed a juror who described Musk as arrogant and irrational.
“Where are you on the confidence scale?” the judge asked for an impartiality investigation.
“I’m sure,” said the woman.
Asked for her impression of Musk and Twitter, another female juror said, “I think he’s been a little off his rocker lately…but as far as breaking laws, I don’t know.”
“Regardless of your opinions… do you think you can judge the evidence fairly?” Judge Chen asked.
“Me,” said the woman.
Only vaccinated persons are allowed to participate in the jury. All courtroom participants will wear a mask, with some exceptions, to introduce the parties, witnesses and the judge while giving instructions.
Judge Chen told prospective jurors that the trial is expected to last about three weeks.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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