Elon Musk expected strong financial support when he tweeted that he would take Tesla private in 2018, but lacked specific commitments from potential backers, according to testimony he gave on his third day of questioning in a San Francisco federal court.
Musk is accused of defrauding investors by driving up the price of Tesla stock by tweeting on August 7, 2018 that he had “funding secured” to take the electric carmaker private.
The trial is testing whether the world’s second-richest person can be held liable for his use of Twitter. At stake are millions of dollars for shareholders who claim they suffered losses after Musk tweeted that “investor support is confirmed” for the deal.
Tesla’s stock price surged after Musk’s tweets, and later fell as it became clear the buyout would not happen.
Musk told the jury on Tuesday that he could have drawn upon several sources of financing to take Tesla private, from existing shareholders like Oracle Corp co-founder Larry Ellison to Saudi Arabia’s sovereign wealth fund or his own fortune.
“Funding was absolutely not an issue,” Musk said. “It was quite the opposite.”
Musk, however, acknowledged he did not have binding agreements with investors, leaving it to the jury to decide if he misled shareholders.
A jury of nine will decide whether the Tesla CEO artificially inflated the company’s share price by touting the buyout’s prospects.
Responding to questions from his lawyer Alex Spiro, Musk said that his tweet was intended to inform investors about his interest in taking Tesla private. Musk said he had already discussed his interest with the Tesla board and Saudi Arabia’s sovereign wealth fund and he feared it would leak to the media.
“I had no ill motive,” he said. “My intent here was to do the right thing for shareholders.”
The Saudi fund did not immediately respond to a Reuters request for comment.
Musk told the jury he decided to drop the idea of taking the company private after getting feedback from shareholders.
“After talking to a number of investors, especially the smaller investors, they said they would prefer a Tesla that remained public and I felt it was important to be responsive to their wishes,” Musk testified.
The jury was shown notes and documents from a board meeting in the days after the tweet at which Goldman Sachs, which was working with Musk on the proposed deal, had indicated there would be more than enough funding to take the company private.
Goldman Sachs did not immediately reply to a request for comment.
But when questioned by Nicholas Porritt, a lawyer for the investors, Musk said he did not have binding agreements for financing from any interested party.
Musk repeatedly resisted the “yes” or “no” responses sought by Porritt about discussions about funding pledges by the Saudi fund, prompting the judge at one point to help with the questioning.
“Was a specific number discussed?” the judge asked.
“Not a specific number,” Musk said.
On Monday, Musk said he could have financed the deal by selling his stake in SpaceX, the aerospace company where he is also chief executive officer. He has also said he believed financing had been pledged by the Saudi fund, before they backpedaled.
The tweet has already resulted in a $40m settlement with securities regulators.
After it became apparent that the money was not in place to take Tesla private, Musk stepped down as Tesla’s chairman while remaining CEO as part of the Securities and Exchange Commission settlement, without acknowledging any wrongdoing.
The trial is scheduled to continue into next week with testimony from Tesla board members and experts.
Reuters contributed to this report