Elon Musk appeared in court on Friday to defend a tweet from 2018 in which he claimed to have secured the finance to take Tesla private in a deal that was never close to materializing.
A $40 million settlement with securities regulators followed the tweet. He was called into court on Friday for around 30 minutes to give sworn testimony in front of a nine-person jury and a packed house of reporters and other observers. It also resulted in a class-action lawsuit alleging he deceived investors.
Musk was then instructed to come Monday to answer additional questions after the trial was postponed for the weekend.
When he first took the witness stand, Musk defended his frequent tweeting as “the most democratic approach” to disseminate information, even if he acknowledged that the 280-character limit on Twitter sometimes make it challenging to be as precise as possible.
Musk said on the witness stand, “I think you can certainly be truthful (on Twitter).” “But can you be thorough? Obviously not,”
The brevity of Twitter, a service that Musk has been overseeing since completing his $44 billion acquisition of it in October, is the source of his most recent issue.
The trial’s outcome depends on whether two tweets sent by Elon Musk on August 7, 2018, hurt Tesla shareholders in the 10 days before Musk acknowledged that the planned buyout would not take place.
When Tesla was still struggling with production issues and was worth much less than it is now, Musk indicated in the first of those two 2018 tweets that “financing secured” for a $72 billion buyout was in place. A few hours later, Musk tweeted again, this time implying that a deal was close at hand.
As part of the Securities and Exchange Commission settlement, Musk resigned as chairman of Tesla while continuing to serve as CEO after it became clear that there wasn’t enough money to take the company private, denying any wrongdoing.
On the third day of the civil trial in San Francisco that his lawyer unsuccessfully attempted to move to Texas, where Tesla is now headquartered, on the theory that media coverage of his turbulent takeover of Twitter had tainted the jury pool, the impulsive billionaire arrived in court wearing a dark suit and tie.
The jury, which was selected earlier this week, listened closely as Musk responded to questions from Nicholas Porritt, an attorney for Tesla shareholders. Musk once requested that Porritt speak louder and closer to the microphone so that Musk could hear him better. Musk occasionally craned his neck to look around the courtroom.
Musk, 51, declared that he cares “a great deal” about investors and lashed out at short sellers who make bets that profit them when the price of a company’s shares drops. He referred to short selling as a “evil” practice that ought to be prohibited and labeled people who benefit from it “a bunch of sharks.”
Musk claimed he couldn’t recall all the contacts from years ago, especially because he receives a “Niagara Falls” of emails, when shown correspondence from Tesla investors pleading with him to reduce or cease using Twitter before the 2018 buyout tweet.
The jury can consider those two tweets to be untrue, according to U.S. District Judge Edward Chen, who made this decision even before Musk took the stand. This leaves the jury to assess whether Musk intentionally misled investors and whether his words caused them to suffer losses.
Musk has argued in the past that he was coerced into signing the SEC settlement and that during talks with officials from Saudi Arabia’s Public Investment Fund, he thought he had secured funding for a takeover of Tesla.
The majority of the three hours a corporate buyout specialist spent on the witness stand on Friday mocking Musk’s proposal to take Tesla private as an ill-thought-out idea. He had been recruited by shareholder lawyers to research the circumstances around the proposal.
Guhan Subramanian, a business and law professor at Harvard University for more than 20 years, said of the idea, “This was an extreme outlier.” It was illogical. It was an illusion.
A representative for Tesla’s board of directors attempted to discredit Subramanian’s testimony by bringing up the fact that it relied on graduate student assistance to review some of the material related to the tweets from August 2018 during a protracted cross-examination that delayed Musk’s appearance. William Price, the attorney, also mentioned Subramanian’s $1,900/hour rate for putting together his report for the case.
The trial involving his tweets against Tesla occurs at a time when Musk has been heavily involved with SpaceX, the rocket ship firm he established, as well as Twitter while acting as CEO of the automaker.
Tesla’s present owners are concerned that Musk has been spending less time managing the automaker at a time of escalating competition because of his leadership of Twitter, where he has decimated the staff and alienated consumers and advertisers. In contrast to the $14 billion swing in fortune that occurred between the company’s high and low stock prices during the period of August 7–17, 2018 covered by the class-action lawsuit, those worries played a part in the 65% decline in Tesla’s stock last year that wiped out more than $700 billion in shareholder wealth.
Since then, Tesla’s stock has split twice, making the $420 purchase price mentioned in his 2018 tweet worth $28 today on an adjusted basis. The company’s shares were down from their split-adjusted top of $414.50 in November 2021, trading at roughly $133.42 on Friday.
After Musk abandoned the idea of a Tesla takeover, the firm fixed its production issues, leading to a sharp increase in car sales that sent its stock soaring and made Musk the richest man in the world until he acquired Twitter. Musk’s position at the top of the list of richest people declined as a result of the stock market’s reaction to his management of Twitter.
He recalled spending numerous nights sleeping at the Tesla factory in California as he struggled to keep the firm solvent when questioned on Friday about the difficulties the company had in 2018.
He remembered, “It was excruciatingly painful to make Tesla successful during that 2017, 2018 era.”