Elon Musk made the “split-second decision” to tweet that he had “funding secured” to take Tesla private in 2018 after seeing a story in the Financial Times, a lawyer for the billionaire told jurors in San Francisco on Wednesday.
Musk sent the message while in a car on the way to an airport after he read a report in the FT detailing how Saudi Arabia’s Public Investment Fund had quietly acquired a $2bn stake in the electric vehicle group, a lawyer for Musk and Tesla, Alex Spiro, said.
Days earlier, Musk had met with the PIF to discuss taking Tesla private, Spiro said, adding that the billionaire had felt compelled to tweet over fears details of that meeting would also soon leak.
“In a rush he used the wrong words,” Spiro said during his opening statement. “He hadn’t planned to tweet this.”
The comments came at the start of a trial in a lawsuit brought by Tesla shareholders who have accused Musk of manipulating the electric-car maker’s stock price with several tweets, including one that read: “Am considering taking Tesla private at $420. Funding secured.”
Tesla’s stock soared after the message. But a deal, which would have been a 20 per cent premium on the company’s then-market value, never materialised, and the share price cratered.
Lawyers representing shareholders bringing the lawsuit told the court Musk’s claims of an offer had caused “regular” investors to lose millions of dollars, calling the carmaker’s chief executive’s claims of having funding secured “incoherent, incomplete and illusory”.
According to Tesla board meeting minutes shared in court, no formal written proposal about taking the company private had been reviewed by the company’s directors.
“When the CEO of a public company like Tesla lies about his company and hurts investors, it’s critical that he is held accountable for that harm that he causes,” Nicholas Porritt, a lead attorney for plaintiffs, said in his opening statement.
Glen Littleton, the representative for the shareholder plaintiffs, said he had been compelled to sell his Tesla stock options after Musk’s tweet, conscious the company going private would have made his position worthless.
“I was in a state of shock during this time,” Littleton said on the stand. “‘Funding secured’ is so definite to me. That was the primary driver.”
Musk’s lawyers argued the term “funding secured” did not imply the CEO had secured funding, but instead that he was stating his intentions, having received a “handshake of significance” from PIF.
“The market always understood that this was a consideration,” Spiro said. “Considerations aren’t certain. Everybody knows that.”
Musk had sent an email to the board that constituted a proposal for his go-private plan, Spiro added.
The US Securities and Exchange Commission fined Tesla and Musk $20mn each in 2018 over the “funding secured” tweets, and ordered the billionaire to step down as the carmaker’s chair.
Spiro said earlier that Musk planned to testify in his defence during the trial. Other listed witnesses, who may or may not be called, include members of Tesla’s board, its chief financial officer and head of investor relations; and Silicon Valley figures such as Silver Lake managing partner Egon Durban, and Oracle co-founder and Musk confidant Larry Ellison.
The trial is expected to last until at least early February. The nine-member jury will be asked to decided whether or not Musk’s tweets had been intentionally misleading and caused investors material harm, and if so, how much in damages investors are owed.
Prior to opening statements on Wednesday, US district judge Edward Chen scolded the legal teams for excessive and lengthy late-night filings and objections. “I’ve got 300 cases, I’ve got murder cases,” the judge said.
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