Elon Musk speaks out in class action lawsuit over controversial tweet



CNN

Tesla CEO Elon Musk spoke in a California courtroom on Friday to testify in the trial over his controversial “funding secured” tweet in 2018.

Tesla (TSLA), Musk and corporate leaders are facing a shareholder lawsuit over his infamous 2018 tweet, which said he was considering taking Tesla (TSLA) private at a price of $420 per share.

It was not problematic.

But he concluded the tweet with two words that cost the CEO millions of dollars in fines and legal fees: “Funding secured.”

Musk had spoken to Saudi sovereign wealth fund executives about the funding he would need to take Tesla private. However, the money was anything but ‘secure’.

Shares of Tesla initially climbed 11% on the day of his tweet, but never hit the expected level of $420, hitting a high that day of $387.46. And they quickly fell well below their pre-tweet price of $344, hitting $263.24 a month later, as it became clear funding was far from secure, sparking the lawsuit.

A year later, Tesla shares have had an extraordinary run, gaining 1,520% since the day of the ‘funding secured’ tweet, but some investors say they had already lost as they sold Tesla shares to secure themselves. protect.

Lead plaintiff Glen Littleton testified Wednesday that he lost more than 75% of his investments following Musk’s “funding secured” tweet.

“I wanted to secure my livelihood. It posed a threat to my livelihood,” he said of Musk’s failed $420-per-share deal with the Saudi Arabian Public Investment Fund.

Musk argued Friday that his tweets don’t drive Tesla’s stock price up or down.

“The causal relationship is clearly not there just because of a tweet,” Musk said.

Musk also argued that Twitter’s character constraint made it difficult to be as wordy as one might be in a formal financial filing, which is detailed, subject to regulations and vetted by financial disclosure experts.

Guhan Subramanian, a Harvard law professor and expert witness for the plaintiff, argued earlier Friday that Musk’s tweet and proposed deal were a case of blatant corporate governance.

“Not having a guardrail is very disturbing,” Subramanian said of Musk’s Twitter account. Musk said Friday that no one at Tesla reviewed his tweets in 2018 before posting them.

Subramanian described that when public companies go private, as Musk proposed, there is a much more extensive and rigorous process than what Musk and Tesla had gone through. He cited when Dell went private in 2013 as an example. Usually a special committee is formed and there are months of engagement with consultants and advisors. Boards of directors generally approve the announcement of a company receiving a privatization offer, which Tesla did not.

Also, any bid to privatize a company is usually not announced by the CEO, given concerns about conflicts of interest, he said.

Musk’s attorney, Alex Spiro, had argued Wednesday that the CEO’s choice of word was wrong, but it was not a case of fraud.

Musk’s tweet previously prompted civil action by the Securities and Exchange Commission, the federal agency that protects investors. A settlement was reached in which Musk and Tesla each paid $20 million in fines and Musk relinquished his title as chairman. Musk was also supposed to have certain tweets edited before posting them, according to the agreement.

Musk’s testimony is expected to continue on Monday. The trial is expected to run until February. 3.

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