Tesla CEO Elon Musk took the witness stand for a second day on Monday and tried to explain the thought process behind his controversial 2018 “funding secured” tweet, pushing back against the idea that it was partly a joke.
Musk, Tesla and the company chiefs are facing a shareholder lawsuit over the tweet, in which the billionaire said he planned to take Tesla private for $420 a share and had “secure funding”. Those two words forced the CEO to step down as executive chairman of Tesla and pay millions of dollars in fines and legal fees.
Musk had spoken to Saudi sovereign wealth fund executives about the funding he would need to take Tesla private. However, it was anything but “secure”. Musk shared his recollection of the incident in his testimony on Monday.
“I had understood that they would proceed with the deal,” Musk said. Musk also claimed he was worried news of the talks would leak to the press and tweeted it himself to “make sure all investors would be on a level playing field.”
Asked, Musk denied choosing the $420 price as a joke given its significance to marijuana enthusiasts, but rather as a roughly 20% premium to the stock price at the time.
“The price of 420 was no joke,” he testified. At another point he said, “There’s karma around 420, though I have to wonder if it’s good or bad karma at this point.”
On Friday, Musk spoke for about 30 minutes and said his tweets didn’t drive Tesla’s stock price up or down. He pointed to an incident in May 2020 when he tweeted that “Tesla stock price is too high.” The stock price fell on the day of his tweet but recovered and closed the year higher than it opened.
But lead plaintiff Glen Littleton testified last week that he lost more than 75% of his investments following Musk’s “funding secured” tweet.
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. “In his rushed and reckless state, he tweeted the wrong choice of words,” Spiro said. “In his mind, funding wasn’t an issue, he was secured. But what he said in that tweet was ‘funding secured’ without specifying what that meant to him.”
Guhan Subramanian, a Harvard law professor and expert witness for the plaintiff, argued Friday that Musk’s tweet and proposed deal were a blatant case of 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 said 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. Usually a special committee is formed and there are months of engagement with consultants and advisers. Boards of directors generally approve the announcement of a company receiving a privatization offer, which Tesla did not.