Elon Musk, CEO of Tesla, took the stand in a courtroom in California on Friday to testify in the case filed in response to his controversial tweet from 2018 that stated “funding secured.”
A shareholder complaint has been filed against Tesla (TSLA), Musk, and the firm’s board in response to his now-famous tweet from 2018. In the post, Musk stated that he was considering taking Tesla (TSLA) private for $420 per share.
That didn’t present any difficulties.
However, he closed the tweet with the words “Funding secured,” which has led to the CEO Elon Musk being forced to pay tens of millions of dollars in fines and legal fees due to the incident.
Musk had contacted executives at the Saudi sovereign wealth fund to discuss the cash necessary for him to take Tesla private. On the other hand, the money was not in any way “secure.”
Tesla shares initially increased by 11% on the day of his tweet, but they could not reach the $420 anticipated, reaching a high of $387.46 that day. As it became apparent that the funding was not even close to being secure, which led to the filing of the lawsuit, the price of the shares quickly dropped significantly below their pre-tweet price of $344, reaching a low of $263.24 one month later.
One year later, Tesla’s stock went on an incredible run, increasing 1,520 percent from the day of the tweet that said “financing secured.” However, some investors claim they had already lost out since they had sold their Tesla shares to protect themselves.
Following Musk’s tweet claiming to have funding secured
The primary plaintiff, Glen Littleton, stated in his testimony on Wednesday that he had lost more than 75% of his assets.
“I wanted to make sure I could provide for myself. This posed a threat to my livelihood,” he stated about the collapse of Musk’s arrangement to sell his shares to the Public Investment Fund of Saudi Arabia for $420 each.
Musk maintaine on Friday that the price of Tesla’s stock is not affect by his tweets in any way, either higher or lower.
Elon Musk state that it is evident that there is not a causal relationship merely because a tweet sent out.
Musk also argued that the character limit of Twitter made it challenging to be as long as one might be in a formal financial filing. Legal and financial filings are detaile, subject to regulations, and vett by financial disclosure experts. Musk argued that the Twitter character limit made it difficult to be as long as one might be in a formal financial filing.
Earlier on Friday, Guhan Subramanian
A professor of law at Harvard and an expert witness for the plaintiff, said that Musk’s tweet and the proposed purchase were examples of poor corporate governance.
On Musk’s Twitter account, Subramanian stated, “To have no guardrails is quite troubling.” Musk testified on Friday that nobody at Tesla looked over his tweets before he tweeted them in 2018.
Subramanian explained that when it comes to public firms going private, such as what Musk was seeking to do with Tesla, there is a process that is significantly more involved and stringent than the one that Musk and Tesla had gone through. As an illustration, he used 2013, when Dell became a private company. Usually, a special committee is establish, and engagement with experts and advisers typically continues for several months. The board usually approves the disclosure that a corporation has received an offer to go private of directors of that company; however, this was not the case with Tesla.
Because of the potential for a conflict of interest
The CEO of a company will not typically make public any offer to take the business private, according to his statements.
On Wednesday, Musk’s attorney Alex Spiro argued that the CEO’s wording was inappropriate but that the situation did not include fraud.
In the past, the Securities and Exchange Commission, a federal organization that safeguards investors, filed a civil claim in response to one of Musk’s tweets. Musk agreed to step down as chairman of Tesla as part of the settlement, which called for the company and Musk himself to pay fines totaling $20 million. According to the terms of the agreement, Musk was also require to have a few of his tweets evaluate before publishing them.
On Monday, Musk is scheduled to resume providing testimony. The trial should last until February 3rd.
