Elon Musk testifies he thought he had Saudi financing to take Tesla private

Tesla chief executive appears in court for a second day in securities fraud case

Tesla chief executive Elon Musk is questioned during the trial at the Federal Court in San Francisco on Monday. Reuters
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Elon Musk testified on Monday that he was sure he had backing from Saudi financiers in 2018 to take Tesla private, as he defended himself against claims that he defrauded investors by tweeting about his electric car company.

At a trial in San Francisco Federal Court, Mr Musk told the investors' lawyer Nicholas Porritt that on July 31, 2018, he met representatives of Saudi Arabia's Public Investment Fund at Tesla's factory in Fremont, California.

He said he did not discuss a takeover price, but the Saudi representatives made it clear they would do whatever it took to make a buyout happen.

“PIF unequivocally wanted to take Tesla private,” Mr Musk said.

The trial tests his habit of taking to Twitter to air his sometimes irreverent views, and when the world's second-richest person can be held liable for crossing a line.

At stake are millions of dollars for shareholders who claim they suffered losses after Mr Musk tweeted on August 7, 2018, that he had “funding secured” to take Tesla private at $420 a share, and that “investor support is confirmed”.

Tesla's stock price surged after Mr Musk's tweets, and later fell as it became clear that the buyout would not happen.

A jury of nine will decide whether the billionaire artificially inflated Tesla's share price by promoting the buyout's prospects, and if so by how much.

The plaintiffs have already cleared high legal hurdles in the rare securities class action, with US Judge Edward Chen ruling last May that Mr Musk's post was untruthful and reckless.

But in Monday's testimony, he said he believed he could have sold enough shares of his rocket company SpaceX to fund a buyout, and “felt funding was secured” with SpaceX stock alone.

The US Securities and Exchange Commission also sued Mr Musk over the tweets, leading to a combined $40 million in settlements for him and Tesla, and a requirement that a Tesla lawyer screen some of his tweets in advance.

The SEC had alleged that Mr Musk rounded the buyout offer to $420 a share from $419 because he had recently learnt about the higher amount's “significance in marijuana culture” and thought his girlfriend would find it funny.

Mr Musk denied having thought that.

“It was chosen because it was a 20 per cent premium over the stock price,” he testified. “The $420 price was not a joke.”

He began testifying on Friday, telling jurors that while Twitter, which he bought in October, was the most democratic way to communicate, his tweets did not always affect Tesla stock the way he expected.

“Just because I tweet something does not mean people believe it or will act accordingly,” Mr Musk said.

The defendants also include current and former Tesla directors, who Mr Spiro said had “pure” motives in their response to the plan.

Updated: January 24, 2023, 2:18 AM