Musk testifies, claims tweet that judge ruled false was “absolutely truthful”

January 23, 2023 in News by RBN Staff




Musk testifies he could have used SpaceX shares to fund taking-Tesla-private deal.

Elon Musk spent a full day on the witness stand today to discuss the infamous “funding secured” tweets in which he claimed to have financial backing for a deal to take Tesla private.

Judge Edward Chen already ruled that Musk’s statements in August 2018 about having “funding secured” to take Tesla private were false “and that Mr. Musk recklessly made those representations.” Chen told the jury they must assume the tweets were false, but that they must also decide whether Musk knew the tweets were untrue and whether the tweets gave reasonable investors an impression of Tesla’s situation that was different from reality.

Today, Musk said the “funding secured” tweet was “absolutely truthful” and that he had received a verbal funding commitment at a meeting with Yasir Al-Rumayyan, managing director of the Saudi Arabia government’s Public Investment Fund (PIF). “I felt we had a deal, and it was a done deal,” Musk said.

When plaintiff’s attorney Nicholas Porritt asked Musk about messages from Al-Rumayyan stating that the PIF needed more details before moving ahead, Musk said the Saudi official was “backpedaling” and “ass-covering, for lack of a better word.”

“We’ve tried our absolute hardest to subpoena Yasir and to have him be part of this lawsuit,” Musk said. “The interesting question for you, sir, is why did you not subpoena him? Well, because if you did, it would destroy your case. That’s why.”

Porritt responded that the plaintiffs’ side contacted Saudi Arabia in an attempt to get Al-Rumayyan’s testimony. Before he could elaborate, Judge Chen cut off the discussion and struck both Musk’s answer and Porritt’s reply from the record, saying it was irrelevant to the case.

Chen ruled that Musk’s “funding secured” tweet was false because “discussions between Tesla and the PIF were clearly at the preliminary stage,” with no discussion of purchase price or what percentage of Tesla the Saudi fund would buy. “Based on the evidence of record, the Court finds that no reasonable jury could find the statement ‘Funding secured’ accurate and not misleading,” Chen’s ruling in April 2022 said.

Musk says he could have sold SpaceX shares

Musk also argued today that he had “funding secured” because of his ownership stake in SpaceX, which he could have sold to complete a taking-Tesla-private deal.

“A very important point for the jury I want to emphasize is that I had [sic] majority shareholder of SpaceX, which is the most valuable private company in the United States, and so the ‘secured’ referred both to PIF but also that I had SpaceX stock to also secure the transaction. This is an extremely important point, and you seem to be deliberately avoiding it,” Musk said.

Musk’s testimony began Friday in US District Court for the Northern District of California. The case is primarily about two tweets Musk made on August 7, 2018. The first said, “Am considering taking Tesla private at $420. Funding secured.” The second tweet said, “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”

Plaintiffs argue that Musk’s false statement about securing funding caused them to buy Tesla stock at inflated prices and ultimately lose money when the market reacted to news that Musk didn’t have a funding deal.

“I said that I’m considering, not that it will happen, but that I’m thinking about taking Tesla private at $420 and that, in my opinion, funding is secure for taking it private at that price,” Musk said today.

Musk acknowledged during testimony that the Saudi PIF didn’t learn of the proposed $420 per-share price until his tweet. “They learned the price proposal on that date, yes,” Musk said.

“My tweet was truthful, absolutely truthful”

Musk also testified, “When I said, ‘am considering taking Tesla private, funding secured,’ that was in reference to the meeting that prior weekend with Yasir where he had told me funding was committed. And so my tweet was truthful, absolutely truthful, and more of a—it’s not just PIF, I also had SpaceX stock, and SpaceX stock alone meant ‘funding secured’ by itself.”

Porritt then played a recording from a recent Musk deposition in which he was asked whether he made the “funding secured” statement based on the Saudis’ interest. In the deposition, Musk answered yes to the question without referencing SpaceX.

After hearing the recording today, Musk agreed he didn’t make any reference to SpaceX during his answer in the deposition. But he also said he brought up the possibility of selling SpaceX stock when he gave a deposition to the Securities and Exchange Commission in 2018.

“If you look at the Twitter transaction, that is what I did. I sold Tesla stock to complete the Twitter transaction, and I would have done the same here,” Musk said. During cross-examination, Musk said, “I would have very much hated to sell my SpaceX shares. It would have broken my heart.” But he would have sold the shares if necessary, he added.

“My intent was to do the right thing”

Musk abandoned the idea of taking Tesla private shortly after the controversial tweets. Today, he said he “thought it would be good for the shareholders to take Tesla private. We were under unprecedented attack from short sellers in the public market.”

Musk said he tweeted about the proposal partly to let individual shareholders know they could retain their stakes in Tesla after the company shifted from public to private. Musk was referring to a follow-up tweet that said Tesla shareholders could either sell their shares for $420 or continue to hold shares in a private Tesla.

Porritt asked Musk why he tweeted incomplete details instead of waiting for Tesla to draft a thorough statement. “I wanted to be clear that my intent was to do the right thing for Tesla shareholders and not force them to sell,” Musk answered.

Musk says that he made the “funding secured” tweet when he did because of a Financial Times report on the same day that said the Saudi fund had acquired a $2 billion stake in Tesla. Porritt said the article was published before Musk’s tweet. In response to one of Porritt’s questions, Musk acknowledged that he didn’t read the Financial Times report before posting his tweets.

“By the time the article is written and published, the cat’s out of the bag. I didn’t know what more information the Financial Times was aware of. They certainly could have known about the take-private given that they also knew all of this confidential information, and I wanted to make sure all investors would be on an equal footing,” Musk said.

$420 price not a pot joke, Musk says

Porritt questioned Musk about the $420 price, which has been interpreted as a cannabis-related joke. Musk testified that he chose $420 as a price solely because it was a 20 percent premium over the Tesla stock price.

“The 420 was a coincidence… it certainly was not a joke,” he said.

The SEC’s 2018 lawsuit against Musk, which he settled, said that “Musk stated that 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.'”

Whether Musk’s tweets directly caused the rise in Tesla’s stock price is one of the issues for the jury to consider. When asked if he expected his tweet would cause the Tesla stock price to go up, Musk said that’s “difficult to say” because “counterintuitive” things often happen in the stock market.

Porritt then played a recording of the Musk deposition in which he acknowledged that he “expected there would probably be some increase in the stock price” in response to the tweet. After hearing the recording, Musk answered, “I said it was not certain, but likely there would be some increase.”

The trial is scheduled for 10 days, with each day lasting about five and a half hours, including some breaks. Court adjourned today while cross-examination of Musk continued, so he’s expected to retake the stand tomorrow morning.



Jon is Ars Technica’s senior IT reporter, covering the FCC and broadband, telecommunications, tech policy, and more.