January 30, 2023

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Elon Musk says he could have raised the money to buy Tesla private

Elon Musk said on Monday that he did not lie or misspeak about his plan to take Tesla out of the stock market in 2018, and testified in federal court that the Saudi sovereign wealth fund “categorically wanted to acquire Tesla.”

Investors are suing Mr. Musk, Tesla, and the company’s board of directors because they claim they lost money as a result of Mr. Musk’s statements about his plan to take over Tesla, which later collapsed.

On August 7, 2018, Mr. Musk, who was the electric carmaker’s chairman and CEO at the time, said, books on Twitter: “Thinking of taking a Tesla private at $420. Funding secured.” then booksInvestor support confirmed. The only reason it isn’t confirmed is because it is contingent on the vote of the shareholders.” Tesla’s share price jumped after those posts but later fell as the proposal faded.

How jurors interpret Mr. Musk’s statements and their impact on investors could be crucial to the outcome of this case, which is being tried in San Francisco. An investor victory could mean that Mr. Musk and Tesla will have to pay billions of dollars in damages. But winning the case would allow Mr. Musk to claim vindication against his critics.

The judge overseeing the case, Edward M. Chen, had already ruled that “funding is secured” and that Mr. Musk’s second statement about taking Tesla private was incorrect.

Mr. Musk has testified so far for four hours in this trial and is scheduled to return to the stand on Tuesday. On Monday, he responded to questions about the Saudi fund, the Public Investment Fund, from a plaintiff’s lawyer who pressed him for more details about the plan to take the company private. Musk said officials from the Saudi fund did not sign commitment documents for a deal or discuss how much they would invest in the deal.

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“The exact amount will not be known without knowing who else will participate,” he said. But, he added, he believed “if they say they’re going to do something, they do it.”

Removing a public company from the stock exchange can be costly and difficult. Persons or investment firms seeking to take a private company have to come up with the money to buy all or most of its shares.

The Saudi fund, which had accumulated a 5 percent stake in Tesla before Mr. Musk announced his plans, was an important part of any deal. Mr. Musk has long claimed that Saudi investors are committed to the deal.

Text messages between Mr. Misk and Yasser Al-Rumayyan, who oversees the Saudi fund, appeared last year in court files. In those letters, Mr. Musk criticized Mr. Al-Rumayyan after news reports indicated the fund was lukewarm about the deal. Mr. Al-Rumayyan said in the texts that Tesla and Mr. Musk did not provide enough information for the fund to move forward. Mr. Musk referred to Mr. Al-Rumayyan’s texts as “backpedaling.”

Mr. Musk and Tesla’s legal team tried unsuccessfully to force the fund’s employees to testify at the trial. This month, attorneys for the fund called the subpoenas “legally deficient” and “frankly petty.” A spokesman for the fund did not immediately respond to a request for comment on Monday.

Mr. Musk testified that “secured financing” referred not only to funding from the Saudi fund but also to his stake in SpaceX, the rocket company where he is also CEO. Mr. Musk could theoretically borrow against his stake in SpaceX or sell some of that stock to get the money to take Tesla private.

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“This is a very important point, and one that you seem to be deliberately avoiding,” Mr. Musk told Nicholas Porritt, a lawyer for the plaintiffs. But under cross-examination by Mr. Porritt, Mr. Musk acknowledged that he did not mention SpaceX shares as a possible funding source in the 2021 filing. He later said he mentioned the use of those shares in an affidavit that was part of An investigation by the Securities and Exchange Commission On Mr. Musk’s efforts to take Tesla private.

When asked if he priced Tesla at $420 per share because it would be “a joke your girlfriend would enjoy,” Musk said, “There’s some karma about $420, though I have to wonder if that’s good karma.” Or bad at this goal.” Then he added that he chose $420 because it was about 20 percent more than Tesla’s share price at the time.

Mr. Musk, dressed in a black suit and black surgical mask, entered the courtroom and walked straight to the witness stand. He watched the jurors enter and beckoned to them. Mr. Musk, who said he “had trouble sleeping last night” and that his back was aching, sometimes pushed back in how Mr. Porritt asked questions. Judge Chen told Mr. Musk at least three times that he didn’t respond to the lawyer’s questions or went off topic.

Plaintiffs’ attorneys argued that people made investment decisions because Mr. Musk said he had the financing to take Tesla private and that he had investor backing for the deal. But lawyers for Mr. Musk and Tesla said investors would likely make decisions based on Mr. Musk’s statement that he was considering taking Tesla private — a statement his lawyers claim is true.

Legal experts said most companies and CEOs may have settled a case like this. But Mr. Musk has often shown a willingness to allow lawsuits against him and Tesla to go to trial.

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In his testimony on Friday, Mr. Musk acknowledged that his Twitter account provided important information about Tesla and that he must follow SEC rules. But he said his social media posts do not necessarily cause volatility in Tesla’s share price. He also said it can’t be as comprehensive on Twitter as Tesla can be in SEC filings and news releases.

Mr. Musk also said that his friends, as well as Tesla executives and investors, suggested he take a break from Twitter before he posted about taking Tesla private.

In 2018, Mr. Musk and Tesla settled a separate lawsuit with the Securities and Exchange Commission over his proposal to take Tesla private. They paid fines to the SEC, and Mr. Musk agreed to step down as head of Tesla and allow a lawyer to review certain data about the company before Mr. Musk posts it on social media.

The trial began three months after Mr. Musk got on Twitter. Since then, he has fired most of its staff, changed the content rules and allowed previously banned or suspended users to return to the platform.

Soon after Tesla’s private takeover effort ended in 2018, the company began producing large numbers of cars, sending its stock soaring and making it easier for Tesla to raise billions of dollars by selling stock. But the company’s share price fell last year as Mr. Musk sold shares to fund his acquisition of Twitter and as Tesla faced stiffer competition.