Elon Musk Testifies He Had Funding to Take Tesla Private, Citing SpaceX, Saudi Arabia -- 4th Update
January 23, 2023 (Dow Jones) Print
By Rebecca Elliott
Elon Musk said he had funding to take Tesla Inc. private when he floated the idea in 2018, saying that financing from Saudi Arabia's sovereign-wealth fund and his own stake in rocket-company SpaceX would have provided sufficient capital.
"With the SpaceX stock alone, I felt funding was secured," Mr. Musk said in a second day on the stand in a case brought by investors who say they lost money because of his tweets proposing to take the car company private.
Mr. Musk met with representatives of Saudi Arabia's sovereign-wealth fund, the Public Investment Fund, in late July 2018, a week before floating the possibility of taking Tesla private. A specific price for taking Tesla private wasn't discussed at that meeting, nor was there a signed document, Mr. Musk testified. Nevertheless, Mr. Musk said he walked away from the meeting thinking it was a "done deal."
"The thing that was really, absolutely unequivocal was that they were absolutely supportive of taking Tesla private," he said.
The class-action case being tried in federal court in San Francisco centers on the Tesla chief executive's tweets more than four years ago floating the possibility of taking the company private and the effect they had on individual investors' decision-making. "Am considering taking Tesla private at $420. Funding secured," Mr. Musk, then serving as both Tesla's chairman and CEO, tweeted on Aug. 7, 2018. He later added, "Investor support is confirmed."
An attorney for the group of investors bringing the suit against Mr. Musk, Tesla and the company's board at the time said Mr. Musk lied in saying he had secured funding to take Tesla private. Those lies caused investors who relied on that and other untrue statements to lose money, the attorney, Nicholas Porritt, said.
In questioning Mr. Musk on Monday, Mr. Porritt raised questions about the firmness of the financing, pointing to minutes from an Aug. 3, 2018, Tesla board meeting that stated, "a detailed proposal regarding a going private transaction had not yet been made."
He also sought to sow doubt about Mr. Musk's testimony that he was contemplating relying on SpaceX shares to take Tesla private, a move that presumably would have increased his stake in the electric-car maker. Mr. Porritt referenced an Aug. 7, 2018, email in which Mr. Musk told Tesla employees that he didn't expect his stake in Tesla to change substantially after the completion of a deal.
Mr. Musk said he sold Tesla stock to buy Twitter Inc., the social-media company he recently acquired, illustrating his willingness to sell shares in one company to finance another transaction.
Tesla's stock closed up 11% the day Mr. Musk tweeted about potentially taking Tesla private, then gave back those gains and fell further as questions emerged about the deal, which never came to pass.
An attorney representing Mr. Musk and Tesla said last week that Mr. Musk's "funding secured" tweet was an inartful shorthand for what was going on at the time.
Mr. Musk, in court Friday, pointed to the limitations of communicating on Twitter, which imposes a character limitation on tweets. "I think you can absolutely be truthful. But can you be comprehensive? Of course not, " Mr. Musk told jurors.
Jurors last week also heard from two investors who lost money in the wake of Mr. Musk's tweets, including the lead plaintiff, investor Glen Littleton, who is seeking damages for those losses. Mr. Littleton testified that after seeing Mr. Musk's tweets, he moved quickly to liquidate certain positions, adding, "This represented a threat to my livelihood."
Timothy Fries, a member of the class who testified Friday, said he lost $5,000 after buying 50 shares of Tesla stock following Mr. Musk's tweets. Those shares cost $370 apiece, an investment report showed. He sold those shares at a loss in early September 2018, he said, after it had become clear Tesla wouldn't go private.
Mr. Fries said he understood when he bought Tesla stock that a deal hadn't been completed. However, he added, "I had felt that the funding had already been vetted, because the tweet said, 'funding secured.'"
A lawyer for Tesla and Mr. Musk has said his team had chosen not to enforce subpoenas calling on representatives of Saudi Arabia's PIF to testify.
After Mr. Musk tweeted that he had funding secured to take Tesla private, a top representative for the fund texted the Tesla CEO, court records show.
"PIF remains interested in potential investment opportunities that are consistent with its investment strategy and the EV space is one of interest," the PIF representative said on Aug. 10, 2018. The PIF representative added two days later, "Let's see the numbers and get our people to meet and discuss."
Mr. Musk, on the stand Monday, characterized a message sent by a PIF executive as "ass covering" by someone worried about future litigation and said the person was backpedaling on earlier commitments.
Mr. Musk also took issue with minutes he was shown of the July meeting between him and the PIF. Those minutes indicated the Saudi fund was interested in hearing more about a plan to take Tesla private. Mr. Musk said he didn't recall minutes being taken and called them "not accurate, " suggesting they were made "after the fact."
The sovereign-wealth fund didn't respond to a request for comment.
U.S. District Judge Edward Chen, who is overseeing the trial, ruled last year that some of Mr. Musk's statements about potentially taking the company private -- such as "funding secured" and "investor support is confirmed" -- weren't true. Judge Chen also found that Mr. Musk acted recklessly in sending those tweets.
Jurors are being asked to decide, among other issues, whether the tweets were material to investors and whether the misrepresentations caused investors to sustain losses. On Friday, the judge told jurors that any evidence they might hear about the circumstances surrounding Mr. Musk's Aug. 7, 2018, tweets shouldn't be used to ascertain the truth of the statements but could be relevant to other issues such as whether Mr. Musk knew that what he was saying was false.
Mr. Musk, in his roughly 30 minutes on the stand Friday, raised questions about the link between his tweets and the market's reaction. "Just because I tweet something does not mean people believe it or act accordingly," Mr. Musk said.
The trial is expected to run through early February.
--Meghan Bobrowsky contributed to this article.
Write to Rebecca Elliott at rebecca.elliott@wsj.com
(END) Dow Jones Newswires
January 23, 2023 16:24 ET (21:24 GMT)
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