Elon Musk made the “split-second” decision to tweet that he “secured the funding” to take Tesla private in 2018 after seeing a story in the Financial Times, an attorney for the billionaire told a jury in San on Wednesday Francisco.
Musk sent the message while in a car en route to an airport after reading a report in the FT detailing how Saudi Arabia’s Public Investment Fund has tacitly pledged a $2 billion stake of the electric vehicle group, an attorney for Musk and Tesla, Alex, Spiro, said.
Days earlier, Musk had met with the PIF to discuss Tesla’s privatization, Spiro said, adding that the billionaire felt compelled to tweet over concerns that details of that meeting would also soon leak out.
“He used the wrong words in a hurry,” Spiro said during his opening speech. “He hadn’t planned on tweeting that.”
The comments came at the start of a trial in a lawsuit by Tesla shareholders who have accused Musk of manipulating the electric carmaker’s stock price with multiple tweets, including one that read, “I am considering privatizing Tesla for $420.” Funding secured.”
Tesla stock soared after the news. But a deal that would have meant a 20 percent premium to the company’s then-market value never materialized, and the stock price plummeted.
Attorneys representing shareholders filing the lawsuit told the court that Musk’s claims of an offer caused “normal” investors to lose millions of dollars and called the automaker’s CEO’s claims of securing the financing ” incoherent, incomplete and illusory”.
According to Tesla’s meeting minutes shared in court, no formal written proposal to privatize the company had been considered by the company’s directors.
“When the CEO of a public company like Tesla lies about his company and harms investors, it is critical that he is held accountable for the harm he has caused,” said Nicholas Porritt, a lead counsel for the plaintiffs, in his opening statement.
Glen Littleton, the shareholder plaintiff’s representative, said he was forced to sell his Tesla stock options after Musk’s tweet because he knew privatizing the company would have rendered his position worthless.
“I was in shock at that time,” Littleton said in the stands. “’Financing secured’ is so clear to me. That was the primary driver.”
Musk’s attorneys argued that the term “funding secured” does not imply that the CEO has secured funding, but that he is setting out his intentions after receiving a “significant handshake” from PIF.
“The market has always understood that this was a consideration,” Spiro said. “Deliberations are not certain. Everyone knows that.”
Musk sent an email to the board setting out a proposal for his go-private plan, Spiro added.
In 2018, the US Securities and Exchange Commission fined Tesla and Musk $20 million each for “funding secured” tweets and ordered the billionaire to step down as the automaker’s chairman.
Spiro previously said Musk plans to testify in his defense at the trial. Other witnesses listed, who may or may not be called, are members of Tesla’s board of directors, chief financial officer, and chief investor relations officer; and Silicon Valley figures like Silver Lake managing partner Egon Durban and Oracle co-founder and Musk confidante Larry Ellison.
The process is expected to last until at least early February. The jury of nine will be asked to decide whether Musk’s tweets were intentionally misleading and caused material harm to investors, and if so, how much damages investors are owed.
Ahead of Wednesday’s opening remarks, U.S. District Judge Edward Chen chided legal teams for excessive and lengthy late-night filings and objections. “I have 300 cases, I have murder cases,” the judge said.