A lawyer for Tesla investors on Wednesday said that the company's chief executive Elon Musk “lied” when he tweeted in 2018 that funding was “secured” to take the company private.
The billionaire businessman's comments caused “regular people” to lose millions “when his lies were exposed”, Nicholas Porritt, lead lawyer for the investors, told a San Francisco jury in opening arguments.
Mr Musk is the target of a lawsuit over an August 7, 2018, tweet in which he claimed he had lined up financing to pay for a $72 billion buyout of Tesla.
He then amplified the comment with a follow-up statement that made a deal seem imminent, though no deal ever came about.
In the rare securities class action trial, Mr Musk and his company are bucking the norm of settling claims that clear high legal hurdles, making for a potentially dramatic trial at which the billionaire himself is expected to take the stand.
Tesla investor Glen Littleton is seeking damages on behalf of shareholders, including current and former Tesla directors, who traded the company's stock and lost money during the wild stock swings in the 10 days after the tweets were posted.
For markets to operate normally and fairly, it is “critical that he is held, and the company is held liable”, Mr Porritt said.
A nine-member jury will decide whether the tweets artificially inflated Tesla's share price by playing up the status of funding for the deal, and if so, by how much.
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US District Judge Edward Chen, who is overseeing the trial, has ruled that Mr Musk's statements about the status of the deal were false and that they were made recklessly.
While shareholders sue hundreds of companies and their executives for alleged securities fraud every year, very few of those cases make it to trial. The vast majority are either dismissed by courts or settle.
Mr Musk’s tweet also attracted the attention of securities regulators, who concluded that it was improper and that he was lying. In a settlement, he was forced to pay $40 million and was required to step down as Tesla's chairman.
After opening statements, shareholders will be able to start calling witnesses, one of which is expected to be Mr Musk's brother Kimbal.
The trial is expected to last until early February.
News agencies contributed to this report