Musk has a laugh in court as Tesla tweet fraud trial goes to jury

SAN FRANCISCO -- Elon Musk settled into a federal courtroom here on Friday and had a laugh just as closing arguments were about to begin in the trial over whether his 2018 tweets defrauded Tesla Inc. investors.

The nine-person jury later began deliberations on whether Musk's tweets artificially inflated Tesla's share price by playing up the likelihood of a buyout, and if so by how much.

But before the jury arrived Friday, lawyers for the opposing sides were arguing to U.S. District Judge Edward Chen, whose question about whether it’s “metaphysically possible” for plaintiffs to prove a “material misrepresentation” prompted Musk to laugh out loud.

Jurors have heard weeks of testimony about whether Musk’s tweets in August 2018 about taking the electric-car maker private with “funding secured” amount to fraud, and whether he should be held liable for potentially billions of dollars in damages.

Investment banking witnesses previously testified that even a week after the tweets, they were still working to figure out how the deal would be structured, including who would pay for it.

Musk’s central defense is that he knew he could raise as much as $60 billion to take Tesla private based on a handshake deal with Yasir Al-Rumayyan, the governor of Saudi Arabia’s Public Investment Fund.

The CEO spent a little more than two days on the witness stand, telling jurors that his “funding secured” tweet was “absolutely truthful,” and that he had an “unequivocal” commitment by Saudi Arabia even though he had nothing in writing.

Final arguments

With Musk looking on in a San Francisco federal courtroom, the shareholders' lawyer Nicholas Porritt said "this case ultimately is about whether rules that apply to everyone else should also apply to Elon Musk," the world's second-richest person.

Musk's lawyer Alex Spiro countered that funding was "not an issue" for a Tesla buyout, saying his client was not the "rich liar" and "fire breathing, tweeting monster" that he said the shareholder lawyers tried to portray.

"This isn't the 'bad tweeter' trial," Spiro, who also represents Tesla, said in his closing argument.

The trial is a test of whether the billionaire CEO can be held liable for his sometimes impulsive use of Twitter.

Investors are seeking billions of dollars in damages from Musk, Tesla and several of the company's directors.

Porritt told jurors that Tesla should be liable because it let Musk use Twitter to disseminate corporate information, and recognized that "when Elon tweets about Tesla, people listen."

Tesla's share price traded above where it had been before Musk's tweets for much of the 10-day period covered by the lawsuit, but fell as it became clear no buyout would happen.

Spiro rejected shareholders' claim that some of that decline stemmed from an Aug. 17, 2018, New York Times story questioning the funding.

He said the decline was prompted by concern about Musk's health, from the stress of trying to build more Tesla Model 3 sedans.

He also said the "funding secured" tweet was "technically inaccurate" but not fraudulent.

"Who cares about bad word choice?" Spiro said. "Just because it's a bad tweet doesn't make it fraud."

Exhaustive testimony

During the three-week trial, jurors heard testimony from witnesses including Tesla directors, Musk's financial advisers and Musk himself.

Musk testified that he had lined up financing, including a verbal commitment from Saudi Arabia's sovereign wealth fund, and could have used his stake in SpaceX -- a rocket company of which he is also CEO -- to fund a deal, but admitted he lacked specific commitments from potential backers.

Porritt tried to highlight the lack of written evidence that funding was available. "Does that sound even remotely credible?" he said.

The defense has also said that in tweeting, Musk was focused on making sure small shareholders had the same information as large investors who knew about the potential buyout.

Bloomberg and Reuters contributed to this report.