Tesla CEO Elon Musk testified in court Friday, Jan. 21, local time, about the alleged fraudulent “Tesla going private” tweets. Elon Musk argued that just because he tweets doesn’t mean people believe them and that investors don’t always react to his tweets as expected.
Elon Musk testified for less than 30 minutes before the court adjourned until Monday and no one asked him about his tweets from 2018 when he was considering taking Tesla private and said it had been funded.
Elon Musk’s testimony began with questions about his use of Twitter, which he argued was the most democratic way to communicate. But he refuted that his tweets did not always affect Tesla’s stock in the way he expected. Musk told the jury in San Francisco federal court, “Just because I tweet doesn’t mean people will believe it or necessarily act on it.”
In the lawsuit, Elon Musk is expected to talk about why he insisted that Saudi investors back him in taking Tesla private and whether he deliberately made materially misleading statements in his own tweets.
The case is a securities class action in which the plaintiffs have cleared many legal hurdles, with US judge Edward Chen ruling last year that Elon Musk’s financing tweets were untrue and reckless. The shareholders accused Elon Musk of lying when he sent the tweets, causing millions of dollars in losses to investors.
The investors argued that the tweets amounted to lies and that the dramatic swings in the share price in the 10 days before the plan was abandoned had cost them dearly. The trial asked jurors to delve into Elon Musk’s state of mind at the time he posted the messages and to determine whether his social media tweets had actually influenced investors’ trading.
When Elon Musk was asked by the investors’ lawyers whether he needed to be accurate with his tweets, Elon Musk replied that he was providing “information that the public should hear”, but that the tweets could only convey a maximum of 240 characters.
Elon Musk described the difficulties Tesla experienced when he tweeted, including short sellers betting that the company’s share price would fall. “A bunch of sharks on Wall Street really want Tesla to go down,” he said. The “sharks” he referred to were short sellers, who usually take profits when the stock falls. Elon Musk said the short sellers were fabricating false stories and said the practice should be made illegal.
Earlier on Friday, Tesla investor Timothy Fries told a jury that Tesla stock fluctuated after Elon Musk’s tweet, causing him to lose $5,000. Fries said that Elon Musk’s claim to have “secured funds” meant to him that “the relevant agencies had reviewed the source of those funds”.
He bought 50 shares of Tesla stock at $18,000 the day after Elon Musk’s tweet. He recalled: “Elon Musk told the world that he planned to take Tesla private and got the money. Considering the share price at the time, I felt it was a good buy.”
When Tesla’s share price fell, Frith lost $5,000. He said, “I got involved in this lawsuit because I felt aggrieved and I felt I had suffered because of Elon Musk’s misrepresentations.”
Elon Musk’s personal lawyer, Alex Spiro, told the jury in his opening statement on Wednesday that Elon Musk believed he had received funds from Saudi backers and was taking steps to make the deal happen. Spiro said Elon Musk tried to protect “shareholders” by sending the tweet because he feared confidential information would be leaked to the media.
Spiro acknowledged that while Elon Musk’s tweets were rushed and contained technical errors, they accurately conveyed his sincerity in taking Tesla private.
Guhan Subramanian, a professor at Harvard Law School, told the jury that Elon Musk’s actions in 2018 were “unprecedented” and “incoherent” in terms of structuring the company’s dealings because he made his intentions public without conducting a proper financial or legal analysis.
A jury of six men and three women will decide whether the tweet artificially pushed up Tesla’s share price. If it did, by how much Tesla’s share price was inflated? The defendants in the case include Tesla’s departing and serving directors, who Spiro said each had a motive in responding to Elon Musk’s scheme.
Tesla shares closed up about 5 percent at $133.42 per share on Friday, local US time. Tesla shares have plunged 33 percent since December 1 last year, as the electric car maker faces growing competition and a looming recession.