Elon Musk told a jury that his 2018 tweet announcing a proposal to take Tesla Inc. private included the possibility of using his holdings in SpaceX to help finance the transaction, along with a multibillion-dollar commitment by Saudi Arabia’s sovereign wealth fund.
As the star witness in a securities fraud trial in San Francisco, the Tesla CEO was defending the famous tweet in which he said he was considering taking the electric-car maker private and had “funding secured.” Investors have alleged the tweets were lies that cost them big losses from wild stock price swings over a 10-day period before the plan was abandoned.
Musk testified Monday that the Saudi Public Investment Fund was “unequivocal” in its support of the transaction and said the fund could afford to provide tens of billions of dollars in financing.
Later, the billionaire said he had access to another source of funding: He could have sold shares in his rocket-ship company, Space Exploration Technologies Corp., of which he was the majority shareholder.
SpaceX “serves as the backbone of the U.S. space program and is a very valuable company,” Musk testified. Turning toward jurors, he added: “It’s important for the jury to know that my SpaceX shares alone would’ve made funding secured. Very important.”
A lawyer for the investors, Nicholas Porritt, pushed Musk to admit that he would be growing his stake in Tesla by selling his SpaceX shares. Yet, the lawyer pointed out, Musk had said in a Tesla blog post published after his Aug. 7, 2018, tweet, that the go-private deal has “nothing to do with accumulating control” for himself.
Musk told the jury that he did “mention SpaceX” to the Securities and Exchange Commission when it investigated the tweets in 2018 and he accused Porritt of “deliberately excluding that from jurors.” The SEC probe led to a market-manipulation lawsuit, which Musk and Tesla settled by paying $40 million in fines, along with Musk’s agreement to step down as chairman of Tesla and accept restrictions on his social media communications.
The judge in the shareholder case has already determined that key pieces of Musk’s tweets were objectively false and reckless - and instructed the jury at the outset of the trial to assume as much. Investors still must prove Musk knew his tweets were misleading, and that they were “material,” or important to a reasonable investor. Shareholders also need to tie Musk’s tweets to their trading losses.
Porritt’s questioning Monday was focused on showing that Musk’s tweets were premature because very little of the legwork to complete a $60 billion transaction was actually done. The jury heard extensively about Musk’s communications with the Saudi fund’s governor, Yasir Al-Rumayyan, and how they had a falling out after the tweets.
In a text exchange, Musk accused the Saudi official of backing out on their handshake agreement, and Al-Rumayyan replied that he didn’t have enough information to commit to the transaction and complained that Musk’s public statements about their private discussions were “ill-advised.”
Musk disclosed when he first arrived in court that he had a bad night’s sleep, and some of his meandering and clipped comments on the witness stand showed him growing weary as Porritt sharpened his questions to try to punch holes in the take-private plan.
There were also moments of levity Monday, like when Musk revealed that he himself uses the term “infamous” to describe the tweets at issue. When Porritt accidentally referred to Musk as “Mr. Tweet,” the billionaire chuckled.
At another point, Porritt asked Musk whether the reference in the tweet to $420-a-share was really a joke that he thought would amuse his girlfriend at the time. The number is a slang term for marijuana consumption.
“There is some karma around 420” and there’s a “question whether that is good or bad karma at this point,” Musk said, prompting laughter in the courtroom.
But he said the amount was chosen because it reflected about a 20% premium on Tesla’s stock price.
“I don’t know if she thought it funny or not but the 420 price was not a joke,” he testified, referring to his then-girlfriend.
Read More: Musk Didn’t Own Enough Tesla in 2018 to Take Private Alone
When Porritt finished his questioning, Musk faced much friendlier queries from his own lawyer, Alex Spiro.
Musk was asked by his attorney why he counted on the Saudis to “put their money” where their mouths were on his proposal to take Tesla private.
“One should expect consistency,” Musk said. In an earlier conversation, he explained, he told the PIF that if it was serious about investing in Tesla, it should buy 5% of the company in the public market. Without more discussion, and without any formal contract or paper work, it happened. “It’s reasonable to expect they’ll behave the same way in the future as they have in the past,” Musk said.
Spiro also noted that a previous witness testified that completing a transaction as costly and complicated as taking Tesla private would be “unprecedented” on the short timeline that Musk contemplated.
“I’ve done things that are unprecedented where I’ve been told many times it isn’t possible,” Musk said. When Tesla first launched, his critics said he couldn’t build an electric car and even if he could no one would buy it, he recalled. “I was called a fool many times.”
After about four hours with Musk on the witness stand, the judge adjourned the trial for the day. Musk is set to return Tuesday to finish his testimony.
Musk is no stranger to courtroom battles - and has been nicknamed “Teflon Elon” for his ability to escape unscathed. He took the stand and prevailed in trials in 2019 in Los Angeles and in 2021 in Delaware. He also testified in November in a Delaware investor case over his $55 billion Tesla pay package — but that one hasn’t been decided yet.