Washington, D.C. CNN —
Tesla CEO Elon Musk took the witness stand for a second day Monday, trying to explain the thought process behind his controversial 2018 “funding secured” tweet, dismissing the idea that it was partly a joke acted.
Musk, Tesla and the company’s directors are facing a shareholder lawsuit over the tweet, in which the billionaire said he was considering privatizing Tesla for $420 a share and had “secured the funding.” Those two words resulted in the CEO having to step down from his position as Tesla’s chairman of the board and paying millions of dollars in fines and legal fees.
Musk had spoken to Saudi sovereign wealth fund executives about the funding he would need to privatize Tesla. However, it was anything but “secured”. Musk shared his memories of the incident in his statement Monday.
“My understanding was that they would go ahead with the deal,” Musk said. Musk also claimed he was concerned about news of the deal talks leaking in the press, and tweeted it himself to “ensure all investors have an equal footing.”
Under questioning, Musk denied that he chose the $420 price tag as a joke because of its importance to marijuana enthusiasts, rather than a roughly 20% premium to its stock price at the time.
“The price of 420 was no joke,” he testified. Elsewhere he said, “There’s some karma around 420, although I should be wondering if that’s good or bad karma at that point.”
Musk spoke for about 30 minutes on Friday, testifying that his tweets are not moving Tesla’s stock price either 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 rebounded to end the year higher than it started.
But lead plaintiff Glen Littleton testified last week that he lost more than 75% of his investments after Musk’s “funding secured” tweet.
Musk attorney Alex Spiro argued on Wednesday that the CEO’s choice of words was wrong, but that it was not fraud. “In his rushed, reckless state, he tweeted the wrong choice of words,” Spiro said. “Financing was not a problem for him, it was secured. But what he said in that tweet was ‘funding secured’ without elaborating on what that meant for him.”
Guhan Subramanian, a Harvard law professor and witness for the plaintiff, argued Friday that Musk’s tweet and the proposed deal were a case of egregious corporate governance.
“Having no guard rails is very unsettling,” Subramanian said via Musk’s Twitter account. Musk testified Friday that no one at Tesla checked his tweets in 2018 before posting them.
Subramanian said that when public companies go private, as Musk proposed, there is a much more extensive and rigorous process than what Musk and Tesla went through. Typically a special committee is formed and there is month-long collaboration with advisers and advisers. Boards of directors typically approve the announcement that a company is receiving an offer to go private, which was not the case with Tesla.