Tesla CEO Elon Musk took a second day on the witness stand Monday, trying to explain the thought process behind his controversial 2018 “funding secured” tweet, defending the idea that it was partly a joke.
Musk, Tesla and company executives are facing a shareholder lawsuit over the tweet, in which the billionaire said he was thinking about taking Tesla private at $420 a share and that he had “secured the funding.” Those two words resulted in the CEO having to relinquish his position as Tesla’s executive chairman and pay millions of dollars in fines and legal fees.
Musk had spoken to executives at the Saudi sovereign wealth fund about the financing he would need to take Tesla private. However, it was anything but ‘secure’. Musk shared his memory of the incident in his testimony on Monday.
“It was my understanding they were going through with the deal,” Musk said. Musk also claimed he was concerned that news of the deal talks would leak into the press, tweeting it himself to “ensure all investors are on an equal footing.”
Under questioning, Musk denied that he had chosen the $420 price as a joke given its significance to marijuana enthusiasts, but rather as a roughly 20% premium over the stock price at the time.
“The price of 420 was no joke,” he testified. At another point he said, “There’s some karma around 420, though I have to wonder if that’s good or bad karma right now.”
On Friday, Musk took the stand for about 30 minutes and testified that his tweets do not cause Tesla’s stock price to go higher or lower. He pointed to an incident in May 2020 when he tweeted that “Tesla stock price is too high”. The stock price fell on the day of his tweet, but recovered to finish the year higher than it started.
But the lead prosecutor, Glen Littleton, testified last week that he lost more than 75% of his investments after Musk’s “funding secured” tweet.
Musk lawyer Alex Spiro had argued on Wednesday that the CEO’s choice of words was wrong, but that there was no fraud. “In his hurried, reckless state, he tweeted the wrong choice of words,” Spiro said. “In his mind, funding was not a problem, it was secured. But what he said in that tweet was “funding secured” without explaining what that meant to him.
Guhan Subramanian, a Harvard law professor and an expert witness for the plaintiff, argued Friday that Musk’s tweet and the proposed deal were a case of blatant corporate governance.
“It’s very disturbing not to have guardrails,” Subramanian said of Musk’s Twitter account. Musk testified on Friday that no one at Tesla reviewed his tweets in 2018 before publishing them.
Subramanian said when public companies go private, as Musk suggested, there’s a much more extensive and rigorous process than what Musk and Tesla had gone through. Typically, a special committee is formed and there are months of involvement with consultants and advisors. Boards of directors typically approve the announcement that a company is receiving an offer to go public, which was not the case with Tesla.