In this courtroom sketch, Elon Musk, left, with shareholder attorney Nicholas Porritt, appears in federal court in San Francisco on Friday.
Vicki Behringer/AP
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Vicki Behringer/AP
In this courtroom sketch, Elon Musk, left, with shareholder attorney Nicholas Porritt, appears in federal court in San Francisco on Friday.
Vicki Behringer/AP
SAN FRANCISCO — Elon Musk took the witness stand Friday to defend a 2018 tweet in which he claimed he had lined up 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 defrauded investors, bringing him to court for about half an hour Friday to testify under oath before a nine-person jury and a room full of media and other spectators.
The trial was then adjourned for the weekend and Musk was told to return on 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 the constraints of Twitter’s 280 character limit can make it hard to make everything as clear as possible.
“I think you can be absolutely truthful (on Twitter),” Musk claimed on the stand. “But can you be comprehensive? Of course not.”
Musk’s latest headache stems from the inherent shortness of Twitter, a service he has led since completing his $44 billion purchase in October.
The trial hinges on the question of whether a pair of tweets that Musk published on August 7, 2018, harmed Tesla shareholders during a 10-day period leading up to Musk’s admission that the purchase which he had predicted would not happen.
In the first of those two tweets of 2018, Musk declared “guaranteed financing” for what would have been a $72 billion purchase of Tesla at a time when the electric automobile was still facing production problems and was much less expensive than it is now. Musk followed a few hours later another tweet suggesting a deal was imminent.
After it became apparent that the money was not in place to take Tesla private, Musk stepped down as chairman of Tesla while remaining CEO as part of the Securities and Exchange Commission settlement, without acknowledging any wrongdoing.
The impulsive billionaire entered court wearing a dark suit and tie on the third day of a civil trial in San Francisco whose lawyer tried unsuccessfully to move to Texas, where Tesla is now headquartered, on the premise that the media coverage of his tumultuous take on Twitter had tainted the jury pool.
The jury that was empaneled earlier this week focused intently on Musk as 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 better. At other times, Musk craned his neck as he looked around the courtroom.
Musk, 51 years old, said he cares “a lot” about investors and also railed against short sellers who make investments that reward them when a company’s share price falls. He called short selling an “evil” practice that should be outlawed, and denigrated those who profit from it as “a bunch of sharks.”
When shown communications from Tesla investors urging him to reduce or completely stop his Twitter habit before the 2018 purchase tweet, Musk said he couldn’t remember all those interactions from years ago, especially since to receive “Niagara Falls” of emails.
Even before Musk took the stand, U.S. District Judge Edward Chen had ruled that jurors could consider those two tweets false, leaving them to decide whether Musk deliberately misled investors and whether his statements they did not suffer loss.
Musk previously claimed he entered the SEC settlement under pressure and claimed he believed he had locked up financial backing for a Tesla purchase during meetings with representatives from Saudi Arabia’s Public Investment Fund.
A corporate buyout expert hired by shareholder lawyers to study the events surrounding Musk’s proposal to take Tesla private spent most of his three hours on the stand Friday deriding the plan as a poorly 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 she relied on the help of graduate students to review some of the material related to the August 2018 tweets. The attorney, William Price, also noted Subramanian’s $1,900 hourly fee for compiling his report for the case.
The trial on his Tesla tweets came at a time when Musk has been focusing on Twitter while also serving as CEO of the carmaker and also remaining deeply involved in SpaceX, the rocket ship company he founded.
Musk’s leadership of Twitter — where he fired staff and alienated users and advertisers — proved unpopular among Tesla’s current shareholders, who worried he was devoting less time to leading the -car manufacturer in a time of intensifying competition. Those concerns contributed to a 65% drop in Tesla 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 August 7-17. , period 2018 covered in the class action case.
Tesla stock has split twice since then, making the $420 purchase price quoted in his 2018 tweet worth $28 on an adjusted basis now. The company’s shares were trading around $133.42 on Friday, down from the company’s November 2021 adjusted split peak of $414.50.
After Musk dropped the idea of buying Tesla, the company overcame its production problems, which resulted in a rapid increase in car sales that sent its stock soaring and hired Musk as the richest person in the world until he bought Twitter. Musk dropped from first place in the wealth list after the stock market’s response to his handling of Twitter.
When asked Friday about the challenges that Tesla faced in 2018, he recalled that he spent many nights sleeping in the car manufacturer’s California factory as he tried to keep the company afloat.
“The great level of pain for Tesla to succeed during that period 2017, 2018 was very great,” he recalled.
