The jury selection process in the trial to determine if one of Elon Musk’s infamous tweets violated U.S. securities laws kicked off on Tuesday.
The trial comes after Tesla’s shareholders sued Musk and Tesla’s board of directors in 2018, alleging that Musk illegally posted on Twitter that funding had been secured to privatize the electric vehicle company. Musk’s post, the shareholders say, artificially manipulated Tesla’s stock price.
“Am considering taking Tesla private at $420. Funding secured,” Musk said in the Aug. 7, 2018, post. That same day, he went on to say, “investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”
On Tuesday, senior federal district court Judge Edward Chen, as well as lawyers for Musk and Tesla’s board, and a group of Tesla’s 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 sidelines of history I’d like to be there if possible,” one male juror told Judge Chen. “It involves so many things: social media, major corporations, securities.”
The shareholders’ claims are similar to those that Musk previously defended against the Securities and Exchange Commission. Nearly two months after the posts, Musk and Tesla settled with the agency for a combined $40 million in civil fines. In addition, Musk agreed to step down as Tesla’s chairman and to pre-publication reviews of his future tweets by Tesla’s general counsel.
Some securities lawyers consider Musk’s defense as a difficult one, given that last year, Judge Chen issued a preliminary ruling in the shareholders’ favor, holding that Musk’s statement about funding was false and made with reckless regard for the truth.
For his part, Musk maintains that none of the statements at issue are “materially false” — a requirement for the plaintiffs to win their case — and that he was in fact considering taking Tesla private at $420 per share. Musk also contends that a subsequent blog post on Tesla’s website that disclosed further information about the potential take private transaction shows that Musk did not make materially false statements.
The group of shareholders represented in the civil suit either bought or sold Tesla shares in the class period extending from the day of Musk’s tweets up until the following week on Aug. 17. The group seeks an unspecified amount of damages.
Initially, Tesla’s (pre-stock split) stock price jumped on the posts from an opening price on Aug. 7, 2018, of $343.84 per share, to an intraday high of $387.46 per share. The stock on Aug. 9, 2018, closed at $352.45 per share. Trading volume also spiked on Aug. 7, averaging more than twice the stock’s daily trading volume over the previous 90 days.
A substantial number of shareholder lawsuits are dismissed or settled before they reach a stage to consider class-action certification, according to NERA Economic Consulting. In 2021, the group reported that 239 outstanding shareholder cases were resolved, with 153 resolved through dismissal and 86 resolved through settlement.
So far though, this case appears to be moving forward as the judge questioned potential jurors Tuesday. Judge Chen earlier denied a request to move the trial to Texas by Musk’s lawyers who expressed concerns about the impressions that local San Francisco area jurors held about Musk.
Jurors, it appeared, had mixed views of the billionaire.
One prospective juror who works a night shift job described Musk as having a “mercenary” personality because he’s “willing to take risks…that’s my image of him.”
Another described Musk as a “fast-rising business man,” while a second potential juror said the billionaire is a “smart, successful pioneer.”
Others offered more unfavorable takes.
“I think he is not a very likable person,” one prospective juror wrote in her questionnaire of the Tesla CEO. Most of her views, she added, were based on Musk’s acquisition of Twitter. “He seems to be just arrogant and narcissistic…I’m not saying that’s how he is, but it seems in certain interviews how he comes off.”
When Judge Chen asked if she could serve as an impartial juror, the woman said: “A lot of people are not necessarily likable people….sometimes I don’t like my husband.”
In a separate line of questioning, Judge Chen talked with a juror who described Musk as arrogant and irrational.
“Where on the scale of confidence are you?” the judge asked to inquire about impartiality.
“Pretty sure,” the woman said.
When asked about her impression of Musk and Twitter, another female prospective juror said: “I think he’s a little off his rocker lately…but with respect to laws that have been broken, I wouldn’t know.”
“Notwithstanding your views…do you think you could judge the evidence fairly?” Judge Chen asked.
“I do,” the woman said.
Only vaccinated individuals are permitted to serve on the jury. All courtroom participants will wear masks with some exceptions for presenting parties, witnesses, and the judge while giving instructions.
Judge Chen told prospective jurors that the trial is expected to last approximately three weeks.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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