Monday, January 23, 2023
HomeTechElon Musk says he believed he had funding to take Tesla private

Elon Musk says he believed he had funding to take Tesla private

Elon Musk said he believed he had sufficient financial backing to take Tesla private, both from Saudi Arabia’s sovereign wealth fund and his own stake in SpaceX, as he testified at a trial in an investor lawsuit claiming that his tweets about the matter cost them millions of dollars.

On his second day of testimony in federal court in San Francisco, Musk said he believed it was “a done deal” that Saudi Arabia’s Public Investment Fund would support a possible attempt to take Tesla private at $420 a share, a premium of roughly 20 per cent at the time, though he acknowledged there was no contract and that many details had not been worked out.

Musk said the PIF had “many multiples” of what was required to take Tesla private, especially because it was not expected to purchase the entire company, and added that his own shares in SpaceX, his rocket company, would be enough to make up for any shortfall. “It’s important for the jury to know that,” he said.

The class-action lawsuit was brought by investors who allege Musk artificially boosted Tesla’s stock price when he wrote on Twitter in August 2018 that he was considering taking the electric-car maker private at a price of $420 a share and had “funding secured” to do so. A deal never materialised. Shareholders allege the posts ultimately caused them significant financial losses as the shares whipsawed in response.

Musk has argued his posts, which prompted Tesla’s share price to jump sharply and end the day 11 per cent up, were based on conversations with backers from PIF and what he considered a “handshake” agreement to take the company off the public markets.

When pressed about the likely reaction to the tweet, Musk, looking solemn in a dark suit with a dark tie, told the packed courtroom that it was “difficult to say” if Tesla shares would rise or fall as markets can act in “counter-intuitive” ways.

But he acknowledged the stock price would likely jump. “I expected that there (would) probably be some increase in the stock price — seems likely. If you say that you’re considering taking a company private or acquiring a company . . . there is going to be some premium . . . In this case, I’m clear about what the premium would be.”

Musk had already testified that his tweet was based on a “split-second decision” after he received a heads-up that the Financial Times was writing an article about the PIF acquiring a $2bn stake in Tesla. He described it on Monday as a “driving factor” behind the tweet.

Lawyers for the shareholders tried to portray the tweet as an unserious proposal, and suggested the $420 price was based on a joke that his girlfriend at the time found funny — 420 is a commonly used term for cannabis. Musk disagreed, saying he was applying a 20 per cent premium to the stock, then rounding up slightly.

“There is some karma around 420, although I’d question (whether it) is good or bad karma, at this point,” he added.

The billionaire emphasised that the tweet said he was “considering” taking Tesla private, and should not have been taken as a definitive agreement.

Nicholas Porritt, a lawyer for shareholders, pointed out Musk did not discuss any proposal in advance with Tesla’s board of directors. But the billionaire said that would be improper: “I, as the bidder, am not allowed to have detailed discussions with the board because it represents the counterparty. So, it would be collusion if I discussed in detail with the board.”

Musk and Tesla have already paid US regulators a total of $40mn over the tweet.

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