Musk on trial for "funding secured" tweet--experts predict he's going to lose

Elon Musk is headed to trial next week over his infamous tweet claiming he had secured funding to take Tesla private at $420 a share. A 10-day civil trial with jury selection scheduled for Tuesday, January 17, is set to begin in US District Court for the Northern District of California.
The class-action lawsuit alleges Musk harmed investors with this tweet from August 7, 2018: "Am considering taking Tesla private at $420. Funding secured." Additional statements by Musk and Tesla reinforced the false impression given by Musk's going-private claim, the lead plaintiff says.
"As a result of the turmoil in the prices for Tesla stock, options, and bonds caused by Musk and Tesla's statements, investors lost billions of dollars from August 7, 2018 to August 17, 2018," lead plaintiff Glen Littleton's trial brief in October said. "These damages include losses resulting from the effect on the prices of Tesla securities immediately following the August 7, 2018 tweets, that was then corrected from August 8, 2018 to August 17, 2018 as the falsity of the tweets was realized by investors... Absent Musk and Tesla's fraudulent statements, these losses would not have been suffered by Tesla investors."
Law professor Robert Miller told Ars he thinks Musk will lose and that the only outstanding question is how much he'll have to pay in damages. "Elon's going to lose, and he's going to lose for a significant amount. We're just talking about exactly how much," said Miller, who is the F. Arnold Daum chair in corporate finance and law at the University of Iowa College of Law. The case will determine "how much of the inflation and deflation is attributable to the fraud," he said.
Another expert agrees. "Everything is lined up for a plaintiffs' win here," Minor Myers, a University of Connecticut corporate law professor, told Reuters. While Musk's chances of winning outright may be low, the plaintiff still has to prove his false statements directly caused investors' losses in order to obtain a significant payout. They're seeking billions of dollars in damages for investors who bought Tesla shares at inflated prices and sold at a loss.
A Musk filing said the plaintiff's request amounts to $66.67 in per-share damages, including the alleged effects of Musk's tweets and "consequential effects" such as shareholder lawsuits and negative news coverage. Musk disputes this calculation.
The $420 price suggested in Musk's tweet was almost a 20 percent premium over Tesla's closing share price of $349.54 on August 2, 2018. "Musk believed that 20 percent was a 'standard premium' in going-private transactions," the lawsuit said. "Although the precise calculation equaled $419.49, Musk rounded the price up to $420 per share because he thought his girlfriend at the time, Claire Elise Boucher (also known as 'Grimes'), would find it funny due to the significance of the number to marijuana users."
Judge ruled tweets false and reckless
Although a jury will decide the case, District Judge Edward Chen already issued a major ruling that makes it harder for Musk to win. In April 2022, Chen granted in part Littleton's motion for partial summary judgment, ruling that Musk recklessly made false statements.
"The Court holds that, based on the evidence presented, there is no genuine dispute that the first three representations at issue were false and that Mr. Musk recklessly made those representations," Chen's ruling said. Chen only sided against Littleton on a fourth statement from a Musk blog post on August 13, 2018, in which he described ongoing communications with the Saudi Arabian sovereign wealth fund.
The jury will be aware of that ruling. As Chen wrote, "[T]he jury will be told that the Court has already found that the August 2018 tweets were false and made with the requisite scienter." (Scienter is a legal term for intent or knowledge of wrongdoing.)
The first of the three statements Chen found to be false and reckless was the infamous tweet: "Am considering taking Tesla private at $420. Funding secured." Chen's ruling said that "a reasonable jury could reach only one conclusion--i.e., that Mr. Musk recklessly tweeted to the public that funding was secured."