In Tesla securities fraud trial, Elon Musk says he’s being truthful on Twitter, but not ‘complete’

When Elon Musk tweets about Tesla, he must follow the same federal regulations that apply to corporate disclosure, the mega-billionaire acknowledged in court testimony Friday.

But just because he tweets something, he said, “doesn’t mean people are going to believe it or act on it.”

And while he insisted his tweets are truthful, “you can be truthful, but can you be complete? Of course not.”

The controversial Musk is tied to another lawsuit, this one a class action filed by Tesla investors who claim they were financially harmed by an August. Musk’s December 7, 2018 tweet that he had “secured financing” to take the company private at $420 per share, indicating a deal worth about $80 billion.

Tesla and SpaceX CEO Elon Musk speaks at the SATELLITE conference and exhibition in Washington.

A federal judge on Friday rejected Tesla Chief Executive Elon Musk’s bid to move or delay a trial over a misleading tweet about a potential purchase of the electric car maker.

(Susan Walsh/Associated Press)

In the weeks following Musk’s tweets, Tesla’s stock went up and down $14 billion, causing many investors who had bet that the deal was real to lose money.

Some of those hit hard were short sellers, an investment style that bets on a stock price going too high and profits from its fall. Asked about these investors, Musk called short selling “evil” and said the practice should be outlawed.

Musk dismissed the idea that there is necessarily a link between his tweets and Tesla’s stock price. He testified that he remembered a time when he tweeted that he thought Tesla’s stock price was too high, and instead of going down, it went up even more. (Musk tweeted this opinion on May 1, 2020; by the close of trading for the day, the stock had lost more than 10% of its value.)

Musk’s testimony lasted only about 30 minutes before the court adjourned. He will take the stand again on Monday morning.

Before Musk’s testimony, a Harvard business professor called by the plaintiffs as an expert witness called the entire episode a stunning example of “blatant corporate governance.”

The professor, Guhan Subramanian, based his testimony on research into more than 60 private deals, also known as management buyouts. He called Musk’s proposal, real or not, “extremely extreme.” He used the words “incomplete”, “preliminary”, “incoherent” and “illusory”. A chief executive almost never announces a deal publicly until a lengthy process, lasting weeks or months, involving a special committee of a board of directors, lawyers, bankers, financiers and, ultimately, shareholders, has been completed. said Subramanian. “You’d like the board to handle this, not the CEO.”

While Musk’s reputation for wild tweeting was well-established (he previously called a critic of his a “fart” on his Twitter account, leading to a defamation lawsuit against him in 2019 that he won Musk), the board never set up guardrails to protect the company from the repercussions of his tweets. The board didn’t even address the matter until nearly a week after the “secured funding” tweet. “The lack of guardrails is deeply troubling as a lack of corporate governance,” Subramanian said.

Meanwhile, Musk’s lawyers have been arguing that Musk sometimes uses “the wrong words” when he tweets. On Friday, they focused on another tweet that came after the “secured funding” message in which Musk talked about allowing current Tesla shareholders to take some of the company private.

Those words, Musk’s lawyers said, indicated the purchase was not yet a done deal.

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