Elon Musk said Monday that he had not lied or spoken badly about his plan to delist Tesla in 2018, testifying in federal court that Saudi Arabia’s sovereign wealth fund “unequivocally wanted Tesla delisted.”
Investors are suing Musk, Tesla and the company’s board because they say they lost money as a result of Musk’s remarks about his plan to take Tesla private, which later collapsed.
On August 7, 2018, Musk, who was president and CEO of the electric carmaker at the time, wrote on Twitter: “I’m considering taking Tesla private at $420. Secured financing.” So he wrote: “Investor support is confirmed. The only reason this is not certain is that it depends on the shareholder vote.” Tesla’s stock price jumped after those posts, but then fell when the proposal faded.
How jurors interpret Musk’s statements and the effect they had on investors could be critical to the outcome of this case, which is being tried in San Francisco. A win for investors could mean Musk and Tesla would have to pay billions of dollars in damages. But winning the case would allow Musk to vindicate himself against his critics.
The judge overseeing the case, Edward M. Chen, has already ruled that the “secured funding” and Musk’s second statement about taking Tesla private were untrue.
Musk has testified for about four hours in this trial so far and is due back on the stand on Tuesday. He answered questions on Monday about the Saudi fund, the Public Investment Fund, from a lawyer for the plaintiffs who pressed him for more details about the plan to take the company private. Musk said Saudi fund officials had not signed documents committing to a deal or discussed how much they would invest in the deal.
“You couldn’t know the exact number without knowing who else would be involved,” he said. But he added that she had believed that “if they say they are going to do something, they do it.”
Taking a public company off the stock market can be expensive and difficult. Individuals or investment firms looking to take a business private have to raise the money to buy all or most of its shares.
The Saudi fund, which had amassed a 5 percent stake in Tesla before Musk announced his plans, would have been a major part of any deal. Musk had long claimed that Saudi investors were committed to the transaction.
Text messages between Musk and Yasir Al-Rumayyan, who oversees the Saudi fund, surfaced last year in court documents. In those messages, Musk criticized Al-Rumayyan after news reports suggested the fund was unwilling to accept a deal. Al-Rumayyan said in the texts that Tesla and Musk had not provided enough information for the fund to proceed. Musk referred to the Al-Rumayyan texts as “throwbacks.”
Musk and Tesla’s legal team tried unsuccessfully to force the fund’s employees to testify at the trial. This month, lawyers for the fund called the subpoenas “legally deficient” and “frankly frivolous.” A spokesman for the fund did not immediately respond to a request for comment on Monday.
Musk testified that the “secured funding” referred not only to the funding from the Saudi fund, but also to his stake in SpaceX, the rocket company of which he is also CEO. In theory, Musk could have borrowed against his SpaceX stake or sold part of those shares to raise the money needed to take Tesla private.
“This is an extremely important point and it appears you are deliberately avoiding it,” Musk told Nicholas Porritt, a lawyer for the plaintiffs. But under questioning by Porritt, Musk acknowledged that he had not mentioned his SpaceX shares as a potential funding source in a 2021 statement. He later said he had mentioned the use of those shares in a statement that was part of an investigation into the Securities and Exchange Commission about Musk’s efforts to take Tesla private.
Asked if he had priced Tesla at $420 a share because it would be “a joke his girlfriend would like,” Musk said: “There’s some karma around $420, though I have to wonder if that’s good or bad in this moment”. point.” He then added that he had chosen $420 because it was about 20 percent more than Tesla’s stock price at the time.
Mr. Musk, dressed in a dark suit and black surgical mask, entered the courtroom and made a beeline for the witness stand. He watched the jurors as they entered and nodded. Mr Musk, who said he “had trouble sleeping last night” and that his back hurt, sometimes pushed back at the way Mr Porritt asked questions. Judge Chen told Musk at least three times that he had not responded to the lawyer’s questions or that he had wandered off topic.
Lawyers for the plaintiffs have argued that the people made investment decisions because Musk said he had obtained the funds necessary to take Tesla private and had investor support for the deal. But lawyers for Musk and Tesla have said investors may have made decisions based on Musk’s statement that he was considering taking Tesla private, a claim that his lawyers say was true.
Legal experts have said that most companies and CEOs probably would have settled a case like this. But Musk has often shown his willingness to let the lawsuits filed against him and Tesla go to trial.
In his testimony on Friday, Musk acknowledged that his Twitter account provided important information about Tesla and that he had to follow SEC rules. But he said his social media posts didn’t necessarily cause changes in Tesla’s stock price. He also said that he could not be as thorough on Twitter as Tesla could be in SEC filings and press releases.
Musk also said that his friends, as well as Tesla executives and investors, suggested that he take a break from Twitter before posting about taking Tesla private.
In 2018, Musk and Tesla settled a separate lawsuit with the SEC over their proposal to take Tesla private. They paid fines to the SEC and Musk agreed to resign as Tesla chairman and allow a lawyer to review certain statements about the company before Musk posted them on social media.
The trial began three months after Musk acquired Twitter. Since then, it has fired most of its employees, changed its content rules, and allowed previously banned or suspended users back on the platform.
Shortly after efforts to take Tesla private ended in 2018, the company began producing a large number of cars, boosting its stock and making it easier for Tesla to raise billions of dollars through stock sales. But the company’s share price plunged last year as Musk sold shares to finance his acquisition of Twitter and Tesla faced stiffer competition.