Elon Musk's mysterious ways on display in 2018 Tesla Tweet trial
5 min read . Updated: 30 Jan 2023, 05:54 AM IST
PremiumHis 2018 tweet has landed the 51-year-old billionaire into a federal courtroom in San Francisco.
Elon Musk is an active user of Twitter. He is always in news either for his tweets, replies, arguments with users on the microblogging site. From making changes on Twitter to his experience second dose of Covid vaccine booster shot, he says it all.
Recently, his 2018 tweet landed the 51-year-old billionaire into a federal courtroom in San Francisco. In that tweet, he had claimed that he had lined up the financing to take Tesla private in a deal that never came close to happening. The tweet resulted in a $40 million settlement with securities regulators.
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Musk, however, acknowledged he did not have binding agreements with investors for specified amounts, leaving it to the jury to decide if he misled shareholders.
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A jury of nine will decide whether Musk artificially inflated the company's share price by touting the buyout's prospects, and if so, by how much. The trial is scheduled to resume on Tuesday.
Here's what to know so far:
PLANTING THE SEEDS
Evidence and testimony have shown Musk had started to mull taking Tesla private in 2017 so he wouldn't have to hassle with the headaches and distractions that accompany running a publicly traded company.
After a July 31, 2018, meeting with a top representative from Saudi Arabia's sovereign wealth fund, Musk sent a letter to Tesla's board outlining why he wanted to take the automaker private at a price of $420 per share — about 20% above its stock price at the time.
Musk was serious enough that he had already discussed the pros and cons with Michael Dell, who had gone through the public-to-private transition in 2013 when he led a $25 billion buyout of the personal computer company bearing his name, according to trial evidence.
THE TROUBLESOME TWEETS
The crux of the case hinges on an Aug. 7, 2018, tweet in which Musk declared “funding secured" to take Tesla private. Musk abruptly posted the tweet minutes before boarding his private jet after being alerted that the Financial Times was about to publish a story that Saudi Arabia's Public Investment Fund had spent about $2 billion buying a 5% stake in Tesla to diversify its interests beyond oil, according to his testimony.
Amid widespread confusion about whether Musk's Twitter account had been hacked or he was joking, Musk followed up a few hours later with another tweet suggesting a deal was imminent.
Musk defended the initial tweet as a well-intentioned move to ensure all Tesla investors knew the automaker might be on its way to ending its then-eight-year run as a publicly held company.
“I had no ill motive," Musk testified. “My intent was to do the right thing for all shareholders."
Guhan Subramanian, a Harvard University business and law professor hired as an expert for shareholder lawyers, derided Musk's method for announcing a potential buyout as an “extreme outlier" fraught with potential conflicts.
“The risk is that Mr. Musk timed his announcement of his (management buyout) proposal to serve his own interests rather then the interests of the company," Subramanian testified.
WHERE'S THE MONEY?
There's another issue threatening to undermine Musk's defense. He hadn't locked up the financing for his proposed deal or even pinned down down how much would be needed to pull it off, based on testimony from Musk, other witnesses and other evidence.
That is one reason U.S. District Judge Edward Chen had decided last year that Musk's 2018 tweets were false and has instructed the jury to view them that way.
It also prompted regulators to allege Musk misled investors with the tweets, resulting in a $40 million settlement with the U.S. Securities and Exchange Commission that also required Musk to step down as Tesla's chairman.
Chen ruled that the 2018 settlement, in which Musk didn't acknowledge wrongdoing and has since lamented making, can't be mentioned to the jury.
Musk testified that he believed he had secured an oral commitment to provide wherever money was needed for a Tesla buyout during a July 31, 2018, face-to-face meeting with Yasir al-Rumayyan, governor of Saudi Arabia's wealth fund.
That was reinforced in testimony from Tesla's former chief financial officer, Deepak Ahuja, who was at the discussions and took al-Rumayyan on a half-hour tour of a Tesla factory.
But a text message al-Rumayyan sent to Musk after the “funding secured" tweets made it appear that the discussions about the Saudi fund financing a private buyout were preliminary.
“I would like to listen to your plan Elon and what are the financial calculations to take it," al-Rumayyan wrote to Musk, according to a copy submitted as evidence in the trial.
Musk framed al-Rumayyan's text as an attempt to backpedal from his previous commitment. He also insisted the Saudi fund had given an “unequivocal commitment" to financing the buyout.
MONEY MANEUVERING
After his 2018 tweets, Musk tried to get the money needed for the Tesla buyout with the help of Egon Durban, co-CEO of the private equity firm Silver Lake, which helped finance the Dell buyout in 2013. Musk also enlisted Dan Dees, a top executive with Goldman Sachs, an investment banking firm that had worked closely with Tesla.
In testimony, both Durban and Dees discussed efforts to raise money for a Tesla buyout for a wide range of potential investors that included two Chinese companies, Alibaba and Tencent, as well as Google in documents initially code-named “Project Turbo," then “Project Titanium."
The buyout would have required anywhere from $20 billion to $70 billion, according to the documents — funding that never came close to getting raised, Durban and Dees both testified, largely because Musk scrapped the proposal to take Tesla private on Aug. 24, 2018, after consulting with shareholders.
Tesla's shares are now worth eight times what they were then, after adjusting for two stock splits.
Musk still contends he could have gotten the money had he wanted and, even if there was a shortfall, he could have covered any gap by selling some of his stock in privately held SpaceX. That is a strategy Musk used in his $44 billion purchase of Twitter, except he sold about $23 billion of his stock in Tesla.
(With inputs from AP)
