CNN —
Tesla CEO Elon Musk took the stand on Friday in a California courtroom to testify in the lawsuit over his controversial “funding secured” tweet in 2018.
Tesla (TSLA), Musk and company leaders are facing a shareholder lawsuit over his infamous 2018 tweet that said he was considering privatizing Tesla (TSLA) at a price of $420 per share.
That wasn’t a problem.
But he closed the tweet with two words that have caused the CEO to pay millions of dollars in fines and legal fees: “Funding secured.”
Musk had spoken to Saudi sovereign wealth fund executives about the funding he would need to privatize Tesla. However, the money was anything but “secured”.
Tesla shares were initially up 11% on the day of his tweet, but they never reached the expected $420 level, peaking at $387.46 on the day. And they soon fell well below their pre-tweet price of $344, hitting $263.24 a month later when it became clear that funding was far from secure, leading to the lawsuit.
A year later, Tesla stock had an extraordinary run, gaining 1,520% since the day of the “funding secured” tweet, but some investors say they’ve already lost as they sold Tesla stock to protect themselves .
Lead plaintiff Glen Littleton testified Wednesday that he lost more than 75% of his investments after Musk’s “funding secured” tweet.
“I wanted to secure my livelihood. It posed a threat to my livelihood,” he said of the failure of Musk’s $420 stock deal with the Saudi Arabian Public Investment Fund.
Musk argued Friday that his tweets won’t cause Tesla’s stock price to move up or down.
“The causal link is clearly not just because of one tweet,” Musk said.
Musk also argued that Twitter’s character limit makes it difficult to be as verbose as one could in formal financial documentation, which is detailed, subject to regulations, and reviewed by financial disclosure experts.
Guhan Subramanian, a Harvard law professor and witness for the plaintiff, argued earlier Friday that Musk’s tweet and the proposed deal were a case of egregious corporate governance.
“Having no guard rails is very unsettling,” Subramanian said via Musk’s Twitter account. Musk testified Friday that no one at Tesla checked his tweets in 2018 before posting them.
Subramanian described that there is a much broader and more rigorous process when public companies are privatized, as Musk proposed, than what Musk and Tesla had gone through. He pointed to the privatization of Dell in 2013 as an example. Typically, a special committee is formed and there is months-long collaboration with consultants and consultants. Boards of directors typically approve the announcement that a company is receiving an offer to go private, which was not the case with Tesla.
Also, any offer to take a company private is also generally not announced by the CEO due to concerns about conflicts of interest, he said.
Musk attorney Alex Spiro argued on Wednesday that the CEO’s choice of words was wrong, but that it was not fraud.
Musk’s tweet previously sparked a civil suit from the Securities and Exchange Commission, the federal agency that protects investors. A settlement was reached in which Musk and Tesla each paid $20 million in fines and Musk relinquished his title as chairman. According to the agreement, Musk should also have some tweets checked before publication.
Musk’s testimony is expected to continue on Monday. The trial is expected to last until February 3.