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Tesla trial: Closing arguments set to begin in case over Elon Musk’s 2018 tweets

Yahoo Finance’s Alexis Keenan joins the Live show to discuss the latest surrounding the suit Tesla shareholders filed against Elon Musk over his 2018 tweets about the EV maker.

Video Transcript

RACHELLE AKUFFO: Now let's take a closer look at Tesla. And it seems price cuts in China are paying off. Preliminary data from the China Passenger Car Association revealed the company's China made vehicle sales surged in January, up 18% from December, meaning that Tesla sold 66,051 China made electric vehicles last month. Now this, of course, comes amid a troubling backdrop in the world's second biggest economy.

Tesla's Shanghai plant cut output by 1/3 in November in a bid to cope with rising inventory. Now a Reuters report this week suggested the EV leader is now planning to step up output at that facility over the next two months. And to put that in perspective, Tesla was the second biggest selling carmaker in the nation last month after BYD. It shipped over 150,000 cars during that period.

Now, of course, competition in this space has been accelerating quickly. And China continues to be viewed as a key battleground. Sales of new energy vehicles, which include battery powered cars and hybrids, are expected to grow in the nation in the months to come. And to keep up with demand, the company is reportedly considering building an electric vehicle plant in Mexico City. According to comments from a presidential spokesperson, the facility would serve as an export hub for the group. The factory is expected to cost anywhere between $800 million and $1 billion. Tesla shares on the rise today as you can see there, up almost 5%.

Well, a shareholder class action trial against Elon Musk and certain Tesla board members enters its final stage today. Tesla shareholders are suing over Musk's 2018 tweet, saying he secured funding to take Tesla private. Yahoo Finance's Alexis Keenan is following the story and joins us now for more on this. Obviously, a lot of people wondering what was going to happen with this what seemed like an off the cuff tweet, but so much went into it.

ALEXIS KEENAN: So much and potentially so many consequences for this tweet and the one that followed. So the nine-member jury that's hearing this case in California, it's a federal shareholder class action against Musk, as well as Tesla, as well as certain members, current and former members of Tesla's board. They could get the case as soon as today to start deliberating because in just minutes from now, closing arguments are slated to begin.

Now, these shareholders, they say that they lost billions of dollars in trades because they relied on that tweet from Musk in 2018 in August that said he had funding secured to take Tesla private at $440 per share, and that they relied on a second tweet later that same day, affirming that investor support was confirmed.

Now, over this three-week trial, the jury has heard evidence from the shareholders, from Musk himself, from Tesla's board members, also economic experts, as well as Tesla's former CFO. For Musk's part, he testified that his tweets were, quote, "truthful." He said they came after talks with Saudi Arabia's public investment fund that gave a verbal commitment through its representatives. And Musk said that that commitment to fund this take private deal was, quote, "unequivocal." He also said that even without Saudi funding, that he could have sold his shares in SpaceX to fund this kind of a deal. And so he said he didn't necessarily need it.

Also, this jury here, their task specifically with deciding if Musk believed that that funding secured tweet and the subsequent one, if he believed that to be true at the time of the tweet, that's what they're going to have to decide. They're also going to have to figure out if that information was material. And that's the type of information that a reasonable shareholder would rely on in making decisions to buy or sell the stock. Also going to have to decide if the market volatility that followed those tweets, if that is actually was caused, if it was caused by Musk's tweets there.

So a lot for this jury to take to deliberate. They will likely get the case today after closing arguments. And so I suppose we could get a decision even as soon as today. Rachelle.

RACHELLE AKUFFO: I mean, this will be a fascinating one to watch. I mean, but how much money, though, do these Tesla shareholders claim that they lost based on Musk's tweets?

ALEXIS KEENAN: So, in this complaint, the shareholders do not allege a specific dollar amount. However, they're talking about money losses during a 10-day period that was from the day of the tweet on August 7, 2018, up until the 17th. Now the market cap swing for Tesla during that time frame was approximately $12.6 billion.

But then you had shareholder experts, economic experts, testify, one in particular, who was willing to put a dollar figure range for the regular shareholders who bought and sold. And this is completely excluding all types of options contracts that existed during that time. That expert testified that those losses were between $4 billion and $11 billion, coming to 22 about and $66 per share. Rachelle.

RACHELLE AKUFFO: I mean, this is a tough one, trying to figure out that intention and then looking at that timeline of what happened with the stock price afterwards. Great stuff. Alexis Keenan there. Thank you so--