Elon Musk took the witness stand Friday to defend a 2018 tweet claiming he had lined up the financing to take Tesla private in a deal that never came close to happening.
The tweet resulted in a $40 million settlement with securities regulators. It also
led to a class-action lawsuit alleging he misled investors, pulling him into
court for about a half hour Friday to deliver sworn testimony in front of a
nine-person jury and a full room of media and other spectators.
The trial was then adjourned for the weekend and Musk was
told to return Monday to answer more questions.
In his initial appearance on the stand, Musk defended his
prolific tweeting as “the most democratic way" to distribute information
even while acknowledging constraints of Twitter's 240-character limit can make
it difficult to make everything as clear as possible.
“I think you can absolutely be truthful (on Twitter),"
Musk asserted on the stand. “But can you be comprehensive? Of course not,”
Musk's latest headache stems from the inherent brevity on
Twitter, a service that he has been running since completing his $44 billion
purchase of it in October.
The trial hinges on the question of whether a pair of tweets
that Musk posted on August 7, 2018, damaged Tesla shareholders during a 10-day
period leading up to a Musk admission that the buyout he had envisioned wasn't
going to happen.
In the first of those two 2018 tweets, Musk stated “funding
secured” for what would have been a $72 billion buyout of Tesla at a time when
the electric automaker was still grappling with production problems and was
worth far less than it is now. Musk followed up a few hours later with another
tweet suggesting a deal was imminent.
After it became apparent that the money wasn't in place to
take Tesla private, Musk stepped down as Tesla's chairman while remaining CEO
as part of the Securities and Exchange Commission settlement, without
acknowledging any wrongdoing.
The impulsive billionaire came into court wearing a dark
suit and tie on the third day of the civil trial in San Francisco that his
lawyer unsuccessfully tried to move to Texas, where Tesla is now headquartered,
on the premise that media coverage of his tumultuous takeover of Twitter had
tainted the jury pool.
The jury that was assembled earlier this week focused
intently on Musk while he answered questions posed by Nicholas Porritt, a
lawyer representing Tesla shareholders. At one point, Musk asked Porritt if he
would speak closer to the microphone so he could hear him better. At other
times, Musk craned his neck as he gazed around the courtroom.
Musk, 51, said he cares “a great deal” about investors and also
railed against short sellers who make investments that reward them when a
company's stock price falls. He called short selling an “evil” practice that
should be outlawed, denigrating those who profit from it as “a bunch of
sharks."
When shown communications from Tesla investors urging him to
curtail or completely stop his Twitter habit before the 2018 buyout tweet, Musk
said he couldn't remember all those interactions from years ago, especially
since he gets a “Niagara Falls" of emails.
Even before Musk took the stand, U.S. District Judge Edward
Chen had declared that the jurors can consider those two tweets to be false,
leaving them to decide whether Musk deliberately deceived investors and whether
his statements saddled them with losses.
Musk has previously contended he entered into the SEC
settlement under duress and maintained he believed he had locked up financial
backing for a Tesla buyout during meetings with representatives from Saudi
Arabia's Public Investment Fund.
An expert on corporate buyouts hired by shareholder lawyers
to study the events surrounding Musk's proposal to take Tesla private spent the
bulk of his three hours on the stand Friday deriding the plan as an
ill-conceived concept.
“This proposal was an extreme outlier," said Guhan Subramanian,
a Harvard University business and law professor for more than 20 years. “It was
incoherent. It was illusory."
In a lengthy cross examination that delayed Musk's
appearance, a lawyer for Tesla's board of directors tried to undermine
Subramanian's testimony by pointing out that it relied on graduate student
assistance to review some of the material related to the August 2018 tweets.
The lawyer, William Price, also noted Subramanian's $1,900-per-hour fee for
compiling his report for the case.
The trial over his Tesla tweets come at a time when Musk has
been focusing on Twitter while also serving as the automaker's CEO and also
remaining deeply involved in SpaceX, the rocket ship company he founded.
Musk's leadership of Twitter — where he has gutted the staff
and alienated users and advertisers — has proven unpopular among Tesla's
current stockholders, who are worried he has been devoting less time steering
the automaker at a time of intensifying competition. Those concerns contributed
to a 65 percent decline in Tesla's stock last year that wiped out more than
$700 billion in shareholder wealth — far more than the $14 billion swing in
fortune that occurred between the company's high and low stock prices during
the August 7-17, 2018 period covered in the class-action lawsuit.
Tesla's stock has split twice since then, making the $420
buyout price cited in his 2018 tweet worth $28 on adjusted basis now. The
company's shares were trading around $133.42 Friday, down from the company's
November 2021 split-adjusted peak of $414.50
After Musk dropped the idea of a Tesla buyout, the company
overcame its production problems, resulting in a rapid upturn in car sales that
caused its stock to soar and minted Musk as the world's richest person until he
bought Twitter. Musk dropped from the top spot on the wealth list after the
stock market's backlash to his handling of Twitter.
When asked Friday about the challenges that Tesla faced in
2018, he recalled spending many nights sleeping at the automaker's California
factory as he tried to keep the company afloat.
“The sheer level of pain to make Tesla successful during
that 2017, 2018 period was excruciating," he recalled.
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