Elon Musk: Tweets about taking Tesla private weren’t fraud
On Monday, Elon Musk testified in a federal court in San Francisco that he believed he had secured funding to take Tesla private during meetings with representatives from Saudi Arabia’s Public Investment Fund in 2018.
However, no specific funding amount or price was mentioned. The lawsuit, brought by Tesla investors, accuses Musk of misleading them with a tweet stating that funding was secured to take the company private at $420 per share.
The proposed deal ultimately fell through and the tweet led to a $40 million settlement with securities regulators.
The outcome of the trial depends on whether the tweets that Musk posted on August 7, 2018 caused harm to Tesla shareholders during the 10 days prior to Musk’s revelation that the planned buyout would not occur.
Musk spoke in a soft and hesitant manner on Monday, stating that he had difficulty sleeping the previous night and was not feeling his best. He emphasized the importance of the jury knowing that he believed funding was secured due to his ownership of SpaceX stock alone.
He explained that he had sold Tesla stock to purchase Twitter, as he did not want to sell but felt it necessary to make up for a lack of funding from other sources for his $44 billion deal to take Twitter private.
Between April and December of the previous year, Musk had sold nearly $23 billion worth of Tesla shares. He reiterated that his SpaceX shares alone would have meant that funding was secured for the 2018 tweets.
Before Musk testified on Friday, U.S. District Judge Edward Chen had already determined that the jury can consider the two tweets to be false. The jury will now have to decide if Musk intentionally misled investors and if his statements caused them to incur losses.
Musk has argued that he only agreed to the Securities and Exchange Commission settlement under pressure and that he truly believed he had secured financial support for a Tesla buyout during meetings with representatives from Saudi Arabia’s Public Investment Fund.
During a July 31, 2018 meeting, Yasir Al-Rumayyan of the Saudi Public Investment Fund confirmed that they would support Tesla going private and that this was part of what “funding secure” meant, according to Musk’s statement on Monday. He also added that there was the option of using SpaceX stock as well.
This statement was in reference to Musk’s earlier tweets in 2018, where he stated “funding secured” for a $72 billion buyout of Tesla at $420 per share, while the company was still facing production issues and was valued at a lower price than it is currently. Musk had also tweeted later that day suggesting that a deal was imminent.
During a hearing, Nicholas Porritt, a lawyer representing Tesla shareholders, questioned Elon Musk about his decision to use the number 420 in his tweet about taking the company private. Porritt asked if Musk had chosen the number because it was a joke his girlfriend enjoyed.
Musk responded by stating that he believes there is “some karma” associated with the number 420, which is also a slang reference to marijuana, but he was unsure if it was good or bad karma. He also stated that the use of the number 420 was a coincidence and it represented a 20% premium on Tesla’s share price at the time.
Following the revelation that the funds were not in place to take the company private, Musk stepped down as chairman while remaining CEO as part of a settlement with the SEC, without acknowledging any wrongdoing.
On Friday, Musk testified that he believes it is possible to be truthful on Twitter, but acknowledged that it may not be possible to be comprehensive.
On Monday, he reiterated that his tweets were truthful. When asked by his lawyer, Alex Spiro, if he understood the charges against him, Musk stated that he is being falsely accused of fraud, and he firmly denies deceiving investors.
As a result, shares of Tesla increased by 6.6% to $142.18 on Monday.
