Ugh. I don’t think this will go over well.
Hopefully there is stronger evidence than simply “using the wrong words”.
The "funding secured" trial against Tesla boss Elon Musk got underway on Wednesday, with lawyers arguing the billionaire did not commit fraud.
www.yahoo.com
I attended the trial at the Federal Court building in San Francisco yesterday.
Unfortunately I missed the opening statements, but saw the witness-of-the-day in front of the seated jury,
the aforementioned Mr. Littleton. Today is a recess, and since this is being streamed (Zoom audio only),
I'm not sure if I'll be present for many of the days. Here's a Zoom link good during court hours:
www.cand.uscourts.gov
There is sporadic coverage on Twitter and elsewhere, but here is a somewhat gnarly introduction to
the issues:
Musk faces tough trial as judge already ruled his tweets were false and reckless.
arstechnica.com
Further, the docket:
Docket for In re Tesla Inc. Securities Litigation, 3:18-cv-04865 — Brought to you by Free Law Project, a non-profit dedicated to creating high quality open legal information.
www.courtlistener.com
[Aside: I'm a retired engineer who sometimes likes to follow trials in the SF Bay area involving patents, copyrights, or tech companies in general. Since the rules of evidence are different to legal beagles (only what is filtered thru the adversarial system) vs. what evidence is to science types like me (research everything you can from a curiosity standpoint) I would probably make a poor juror in that manner. Further, my own bias here is from multiple angles: (1) I drive a Tesla (Model 3, 2018), (2) I own shares long, kept from since before the infamous tweet, and (3) Simultaneously, I believe that Musk has cretinous opinions unbecoming of a CEO.]
Yesterday's testimony was entirely from an options trader who seemed to panic completely focusing his bets on the veracity of the "funding secure" part of Musk's tweet, at least for a week or two while unwinding his hedges. His statements about never "betting" (only "investing") and "never trading on rumor", to me, did not ring true.
His background was as a commodities consultant (40 years+) who was quite familiar with hedging grain/corn futures
but only traded stock options, mostly all involving Tesla, over the last decade. He was pro-Tesla in general, but never held
shares long, only put/call spreads (straight shares took "too much capital to hold").
He felt that the "Am considering taking Tesla private at 420. Funding secured." tweet was a "done deal" and rapidly liquidated his positions, feeling trapped with longer calls (higher than 420, but also with selling puts <420).
Charts/emails were put up for display and went into evidence, but I could only squint at the screen being too far away,
with no fotos allowed. From notes to his broker:
"Will roll the 450 calls down to 400, 2020 and 2019
Sell 100 400 2020 puts
Liquidate 600/400 2020 put spreads"
His brokerage statement showed high six figures. On cross examination, he was asked about buying rights to the
equivalent of $900K in shares at a clip, but he kept saying they were parts of a swap/spread, so he wasn't that
exposed on a single trade. The jury looked rapt, but their eyes glazed over I'm sure, especially after seeing
the fine print on a couple of dozen options trades over a week or 10 days. Ultimately Littleton bet up to $3.5M and
lost >75%. The guy was overwhelmed, and was only convinced the deal wouldn't happen after a public Tesla blog
entry from Aug. 24, 2018 stating that Tesla would remain public.
To this observer, it appears that it's a problem that he's the chief representative of the Plaintiff class -- those
who traded positions from August 7 - August 17. Opening statements say that Littleton was "just an ordinary guy"the
who reflects the "loss of billions" during that interval. If suit is defined as being that TSLA's price wiggles during
that time were all due to a single tweet, it's only about short-term traders who lost during that time.
Lastly, for now, the related SEC settlement of 40M in another suit covered about a billion in "recognized losses"
during the first two days -- the class period here is defined as 10 days. And, for those participating in that
class action, recovery will only be pennies-on-the-dollar, if that.
www.tesmanian.com
