SAN FRANCISCO — Lawyers for Tesla shareholders suing the electric vehicle maker’s CEO Elon Musk over a misleading tweet urged a federal judge this week to reject the billionaire’s request to move an upcoming trial to Texas from California.
Musk contends he will be treated unfairly by potential jurors in the San Francisco federal court where the 4-year-old case was filed.
Tesla and SpaceX Chief Executive Officer Elon Musk speaks March 9, 2020 at the SATELLITE Conference and Exhibition in Washington.
But in a Wednesday filing, the Tesla shareholders’ attorneys asserted there aren’t any legal grounds to move the upcoming trial that revolves around an Aug. 7, 2018 tweet in which Musk indicated he had lined up financing for a Tesla buyout — a deal that never materialized and resulted in a $40 million settlement with U.S. securities regulators.
The lawyers also argued Musk only has himself to blame for any negative perceptions, largely because of his frequent activity on Twitter, the social media platform that he now owns and runs.
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“For better or worse, Musk is a celebrity who garners attention from the media around the globe,” the shareholders’ attorneys wrote in their 19-page opposition to the transfer request. “His footprint on Twitter alone is partially to blame for that. If ‘negative’ attention was all that was required to disqualify a jury pool, Musk would effectively be untriable before a jury given his knack for attracting ‘negative’ coverage.”
The filing comes less than a week after Musk’s lawyer, Alex Spiro, asked U.S. District Judge Edward Chen to transfer the case to Texas, the state where Musk moved Tesla’s headquarters in 2021 after spending almost 20 years in its original Silicon Valley home. If the trial isn’t transferred, Spiro is pushing for a delay of the start of jury selection scheduled for Tuesday.
The shareholders’ attorneys noted that their lawsuit, filed in 2018, would have never been allowed in a Texas federal court at that time because Musk’s buyout tweet occurred while Tesla was based in Palo Alto, California. What’s more, a list of witnesses includes several former Tesla executives living in California who would be improperly inconvenienced if the trial were moved to Texas.
Chen scheduled a hearing for Friday to hear further arguments about Musk’s effort to move or delay the trial. The judge already determined that Musk’s buyout tweet was false, leaving it to a jury to decide whether he acted recklessly by posting it and whether it caused financial harm to Tesla shareholders.
After adjusting for two stock splits made since 2018, Tesla’s shares are now worth nearly six times more than at the time of Musk’s tweets about the bogus buyout.
Though Musk for years has been hailed in the San Francisco Bay Area as a technology visionary, Spiro believes his reputation has been badly tarnished throughout the region by negative media coverage since he completed his $44 billion purchase of Twitter in October. Since then, Musk has laid off or pushed away more than half of Twitter’s workforce, while alienating the service’s users with policies that critics contend have dismantled the service’s guardrails against misinformation and hateful content.
The backlash to those actions, which Musk has defended as moves to pare Twitter’s losses and protect free-speech rights, increased the chances potential jurors will be biases against him, Spiro said. Among other factors, Spiro cited the possibility that potential jurors drawn from the San Francisco Bay Area may have been recently laid off at Twitter or may know someone who lost their job after Musk’s takeover.
The shareholders’ attorneys cited the roughly 200 jury questionnaires that have been turned into Chen to rebut that argument. Only two or three of the potential jurors acknowledged knowing someone who works at Twitter, according to the attorneys.
Elon Musk and Twitter: A timeline
January 31: Musk begins building up his Twitter stake
Musk starts quietly buying up Twitter shares, building his stake in the company. But it would be months before he disclosed this fact to the public.
March 14: Musk’s Twitter stake tops 5%
Musk’s stake in Twitter tops 5%, but that fact is not disclosed until the following month. Musk was obligated to disclose his stake within 10 days of crossing the 5% threshold, but waited 21 days to do so. During that time, he continued building up his stake.
March 24: Asking whether Twitter should change
The billionaire begins to make pointed statements about the platform from his account. “Twitter algorithm should be open source,” he wrote, with a poll for users to vote “yes” or “no.”
The following day, Musk tweets out another poll to his followers: “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”
March 26: Musk reaches out to Jack Dorsey
Musk reaches out to Twitter cofounder and former CEO Jack Dorsey to “discuss the future direction of social media,” according to a company filing later put out by the company. The two tech founders are known to have a bit of a billionaire bromance on and off Twitter.
April 3: Twitter leadership meets to discuss Musk
Twitter’s board and some of its leadership team meet with representatives from Wilson Sonsini, a law firm, and J.P. Morgan to discuss the possibility of Musk joining the company’s board, according a later securities filing. Dorsey is said to have told the board that “he and Mr. Musk were friends,” according to the filing.
In the meeting, the Twitter board discussed wanting Musk to agree to “‘standstill’ provisions”,” according to the filing. This would effectively “limit his public statements regarding Twitter, including the making of unsolicited public proposals to acquire Twitter (but not private proposals) without the prior consent of the Twitter Board.”
April 4: Surprise! Musk becomes Twitter’s largest shareholder
Musk is revealed to be Twitter’s largest individual shareholder, with a more than 9% stake in the company.
News of the purchase sends shares of the social media company soaring more than 20% in early trading and kicks off a wave of speculation about how Musk might push for changes on the platform.
April 5: Musk agrees to join the board
Twitter CEO Parag Agrawal announces Musk will join Twitter’s board of directors. “Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,” Agrawal says in a post on Twitter.
As part of the appointment, Musk agrees not to acquire more than 14.9% of the company’s shares while he remains on the board. His term on the board is set to go through 2024, according to a regulatory filing.
April 10: Just kidding. Musk ditches the board
Agrawal announces that Musk has decided not to join the board after all. “I believe this is for the best,” Agrawal writes in a letter to the Twitter team.
The reversal opens the door for Musk to pursue a greater stake in the company — and frees him to tweet his many thoughts about the company.
April 14: Musk offers to buy Twitter and ‘unlock’ its potential
Musk stuns the industry by making an offer to acquire all the shares in Twitter he does not own at a valuation of $41.4 billion. The cash offer represents a 38% premium over the company’s closing price on April 1, the last trading day before Musk disclosed that he had become the company’s biggest shareholder.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” Musk writes in his offer letter. “Twitter has extraordinary potential. I will unlock it.”
April 15: The poison pill
Twitter’s board of directors adopts a “poison pill” provision, a limited-term shareholder rights plan that potentially makes it harder for Musk to acquire the company.
April 21: Musk lines up $46.5 billion in financing
Musk lines up $46.5 billion in financing for the deal, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions and one equity commitment letter from himself, according to a regulatory filing.
The billionaire also reveals that he has not received a formal response from Twitter a week after his acquisition offer. He said he is “seeking to negotiate” a definite acquisition agreement and “is prepared to begin such negotiations immediately” — an apparent reversal from his statement in his acquisition offer letter that it would be his “best and final” offer.
Although he is the richest person in the world, much of Musk’s wealth is tied up in Tesla stock, and some followers of the company speculate that it could be challenging for Musk to raise debt against the historically volatile stock.
April 25: Twitter agrees to sell itself to Elon Musk
Twitter announces that it has agreed to sell itself to Musk in a deal valued at around $44 billion. At a conference later in the day, Musk describes his offer to buy Twitter in characteristically sweeping terms as being about “the future of civilization,” not just making money.
At an all-hands meeting that afternoon, Twitter employees raise questions about everything from what the deal would mean for their compensation to whether former US President Donald Trump would be let back on the platform.
April 29: Musk cashes out billions in Tesla stock
Filings reveal Musk sold $8.5 billion of his Tesla stock in the three days after Twitter board agreed to the sale for an average of $883.09 per share. The filings did not disclose the reason for the sale, but Musk appeared to be raising funds to buy Twitter.
May 4: With a little help from his billionaire friends
Musk raises another $7 billion in financing for the deal. The new investors include Oracle founder Larry Ellison, cryptocurrency platform Binance and venture capital firm Sequoia Capital, according to a filing.
May 10: Musk says he would reinstate Trump’s account
Musk confirms what many have assumed for weeks: he would reverse Twitter’s Trump ban if his deal to buy the company is completed.
“I do think it was not correct to ban Donald Trump, I think that was a mistake,” Musk said. “I would reverse the perma-ban. … Banning Trump from Twitter didn’t end Trump’s voice, it will amplify it among the right and this is why it’s morally wrong and flat out stupid.”
May 6: Musk’s lofty goals for Twitter, revealed
Musk aims to increase Twitter’s annual revenue to $26.4 billion by 2028, up from $5 billion last year, according to a New York Times report, citing Musk’s pitch deck presented to investors. To achieve that lofty goal, Musk intends to bolster Twitter’s subscription revenue and build up a payments business while decreasing the company’s reliance on advertising sales, according to the report.
May 12: A partial hiring freeze and executive departures
Twitter confirms to CNN Business that the platform is pausing most hiring and backfills, except for “business critical” roles, and pulling back on other non-labor costs ahead of the acquisition. In addition, Twitter says general manager of consumer, Kayvon Beykpour, and revenue product lead, Bruce Falck, are leaving the company.
May 13: Twitter deal ‘temporarily on hold’
Musk tweets that the deal is on hold, linking to a Reuters report from nearly two weeks earlier, about Twitter’s most recent disclosure about its amount of spam and fake accounts. The figure cited in the report, however, is in line with prior quarterly disclosures.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted.
Shares of the social media site plummet after Musk’s announcement, dropping more than 10% at market open. Two hours after announcing the hold, Musk says he remains set on purchasing Twitter. “Still committed to acquisition,” he wrote.
Later in the day, Musk says his team is testing Twitter’s numbers and “picked 100 as the sample size number, because that is what Twitter uses to calculate <5% fake/spam/duplicate.”
May 14: Oops. NDA problems?
Musk tweets out that Twitter’s legal team accused him of breaking a nondisclosure agreement when the billionaire revealed the platform’s sample size for automated user checks is allegedly just 100 users.
“Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100! This actually happened,” wrote Musk.
May 16: Poop emoji
The standoff over bot accounts continues as Musk exchanges a series of tweets with Agrawal over the issue. After Agrawal carefully explains how Twitter attempts to combat and measure spam accounts, Musk responds with a poop emoji.
Musk follows up with a somewhat more thoughtful question. “So how do advertisers know what they’re getting for their money?” Musk asked. “This is fundamental to the financial health of Twitter,” he added.
May 17: Musk says Twitter deal ‘cannot move forward.’ Twitter disagrees
Musk announces that his acquisition of Twitter “cannot move forward” until he sees more information about the prevalence of spam accounts, claiming that the social media platform falsified numbers in filings. Without citing a source, he claims in a tweet that Twitter is “20% fake/spam accounts” and suggests Twitter’s previous filings with the SEC were misleading.
Later in the day, Musk posts a poll to his Twitter followers: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” before calling on the SEC to evaluate the platform’s numbers. “Hello @SECGov, anyone home?” Musk tweets, in an apparent attempt to get the regulator to look into the matter.
In a statement, Twitter says it remains “committed to completing the transaction on the agreed price and terms as promptly as practicable.” Later, the company says it intends to “enforce the merger agreement.”