Tesla CEO Elon Musk appeared in a California courtroom on Friday to testify in a lawsuit over his controversial “secured funding” tweet in 2018. At the time, Musk said he was considering taking Tesla private at a price of $420 per share.
The video in the media player above is from a previous report.
Tesla, Musk and the company’s directors have faced a shareholder lawsuit over his infamous tweet in 2018 that said he was considering taking Tesla private at $420 a share. It was not problematic.
But he ended the tweet with the two words that cost the CEO millions of dollars in fines and legal fees: “Funding secured.”
Musk had been talking to the heads of Saudi Arabia’s sovereign wealth fund about the financing he would need to take Tesla private, the money was far from “secured.”
Tesla shares initially rose 11% on the day of his tweet, but they never reached the expected $420 level, hitting a high of $387.46 that day. And they soon fell well below their pre-tweet price of $344, hitting $263.24 a month later when it became clear that the funding was far from secure, prompting litigation.
A year later, Tesla shares have been on a meteoric rise, up 1,520% since the “secured financing” tweet, but some investors say they’ve already lost because they sold Tesla stock to protect themselves.
Lead plaintiff Glenn Littleton testified Wednesday that he lost more than 75% of his investment after Musk’s “funding secured” tweet.
“I wanted to secure my livelihood, it was a threat to my livelihood,” he said of the collapse of Musk’s $420-a-share deal with Saudi Arabia’s sovereign wealth fund.
On Friday, Musk maintained that his tweets did not cause Tesla’s stock price to go up or down.
“There’s clearly no causation just because of the tweet,” Musk said.
Musk also argued that Twitter’s character limits make it difficult to be as verbose as it can be in official financial filings, which are detailed, subject to rules and vetted by financial disclosure experts.
Guhan Subramanian, a Harvard law professor and expert witness for the plaintiff, argued earlier Friday that Musk’s tweet and the proposed deal were a case of egregious corporate governance.
“The lack of a fence is very concerning,” Subramanian said of Musk’s Twitter account. On Friday, Musk said no one at Tesla reviewed his tweets in 2018 before he posted them.
Subramanian described that when public companies go private, as Musk has proposed, there is a much more extensive and rigorous process than the one Musk and Tesla went through. He pointed to when Dell went private in 2013 as an example. As a rule, a special committee is created, and consultants and advisers work for several months. Boards of directors usually approve an announcement that a company has received a proposal to become private, which was not the case with Tesla.
Also, CEOs typically don’t announce any proposal to take a company private because of concerns about conflicts of interest, he said.
Musk’s lawyer, Alex Spiro, argued Wednesday that the CEO’s choice of words was wrong, but that it was not a case of fraud.
Earlier, Musk’s tweet sparked a civil lawsuit from the Securities and Exchange Commission, the federal agency that protects investors. A settlement was reached in which Musk and Tesla each paid a $20 million fine and Musk stepped down as chairman. According to the agreement, Musk also had to verify the tweets before they were published.
Musk’s testimony is expected to continue on Monday. The trial is expected to continue until February 3.
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