Musk says Tesla tweet was genuine in fraud case

January 24, 2023
Elon Musk, seen in this file photo, is testifying in court over claims a tweet he wrote about Tesla cost investors millions of dollars.
Elon Musk, seen in this file photo, is testifying in court over claims a tweet he wrote about Tesla cost investors millions of dollars.

SAN FRANCISCO — Elon Musk has told a court that he believed he had enough backing to take Tesla private at the time he issued a controversial tweet.

The boss of the electric car company is on trial after investors claimed the 2018 tweet cost them millions of dollars when a deal did not go ahead.

Musk claims that he had met with a Saudi sovereign wealth fund who indicated they would support a deal. He added he would have sold his stake in rocket firm SpaceX to raise money.

Musk is accused of defrauding investors after he tweeted on Aug, 7, 2018 that he had “funding secured” to take Tesla private at $420 per share, and that “investor support is confirmed”.

The tweet sent shares in Tesla soaring, but weeks later they fell back when Musk said the plan was no longer going ahead, causing a significant backlash for the billionaire.

He was forced by the Securities and Exchange Commission, the US regulator, to step down as Tesla’s chairman and had to have any tweets related to Tesla vetted by an independent committee.

He and Tesla were also fined $20 million each to settle a claim by the SEC that he had committed securities fraud.

On Monday, Musk told a court in San Francisco that he had met with people from Public Investment Fund on July 31, 2018. He said that while a price for taking Tesla private was not discussed, he claimed that the representatives from the fund made it clear they backed a deal.

Musk was also questioned about how he decided on a price of $420 a share and whether it was a reference to marijuana.

According to a filing by the SEC in 2018, Musk had calculated the price by taking Tesla’s share price on a particular day and added a 20% premium. Based on that calculation, the price came to $419.

But, according to the SEC’s legal documents: “He rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.”

In American counterculture, April 20 is a day when thousands of people gather to celebrate marijuana. In the US, dates are written with the number of the month first, then the day — in this case 4/20.

Musk, who has smoked cannabis in public but claimed not to be a regular user, told the court: “420 was not chosen because of a joke; it was chosen because there was a 20% premium over the stock price.”

He added that there was “some karma around 420”, though “I should question whether that is good or bad karma at this point.”

Musk, who bought the social media platform Twitter for $44 billion last year, had told the court on Friday that he did not think that his tweets had affected Tesla’s share price.

“Just because I tweet something does not mean people believe it or will act accordingly,” he told jurors.

Musk also took aim at “evil” short-sellers, who are investors that bet that a company’s share price will fall.

He told the nine jurors: “It’s difficult to appreciate just now just how much attack Tesla was under by short sellers who wanted Tesla to die.”

Musk will continue testifying on Tuesday. He had attempted to have the trial moved from California to Texas due to concerns that a jury would be biased against him due to media coverage of the businessman.

Following his takeover of Twitter, which is headquartered in San Francisco, thousands of staff lost their jobs.

“We don’t think we can get a fair trial in this district, period, full stop,” said Alex Spiro, a lawyer for Musk.

Spiro claimed: “The media reports are character assassinations.”

The request was denied by Judge Edward Chen.

During jury selection, potential jurors expressed a wide-range of opinions about Musk. Some described him as “smart” and a “genius”.

Another said he was “a little off his rocker”. One woman suggested that “he is not a very likable person,”

When asked by the judge whether that meant she would not be impartial towards him, the woman responded: “A lot of people are not necessarily likable people.... sometimes I don’t like my husband.” — BBC

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