The trial, which centered on two tweets announcing that Musk had secured funding to take Tesla private in 2018, brought the 51-year-old billionaire to three days of testimony in federal court in San Francisco, opening the door to prying eyes on him. The peephole mind of the usually elusive person.
Musk now owns the Twitter service, which he deploys as his megaphone, and during his roughly eight hours at the booth, he was often the subject of comparative studies. The electric carmaker’s chief executive is facing a class-action lawsuit on behalf of Tesla shareholders after Musk tweeted that the company acquisition did not happen.
Through his testimony and the evidence presented around it, Musk came across as impetuous, arrogant, combative and contemptuous of the motives of anyone who questioned his motives as a game-changing entrepreneur who inspired an ongoing battle with Apple. Hence the comparison to co-founder Steve Jobs.
At other times, Musk sounds like his supporters are praising him for his shrewd vision — a brave rebel who, by his own estimates, has raised more than $100 billion from investors. They have reaped rich rewards from the pioneering companies he led, including PayPal in digital payments, Tesla in electric cars and SpaceX in rocket ships.
“It was relatively easy for me to get investment support because my track record was so good,” Musk wryly said.
But his confidence in his ability to secure the funding he wanted to carry out his plans was one of the reasons he went to court. The three-week trial is scheduled to resume Tuesday with jury deliberations by Friday.
Here’s what to know so far:
sow the seeds
Evidence and testimony suggest that Musk began thinking about taking Tesla private in 2017 so he wouldn’t have to worry about the headaches and distractions of running a public company.
After meeting with a senior representative of Saudi Arabia’s sovereign wealth fund on July 31, 2018, Musk wrote to Tesla’s board outlining his plans to take the automaker private at $420 a share. The reason — about 20% higher than its stock price at the time.
Musk was so serious, according to trial evidence, that he had discussed the pros and cons with Michael Dell, who went through a public-to-private transition when he led the $25 billion acquisition of the personal computer company that bears his name in 2013.
The crux of the case was an Aug. 7, 2018, tweet in which Musk declared “funding secure” to take Tesla private. Musk tweeted out of the blue just minutes before boarding his private jet, when he was told that the Financial Times was about to publish a report that Saudi Arabia’s Public Investment Fund paid around $2 billion for the Trump administration, according to his testimony. 5% stake in Tesla to diversify its interests beyond oil.
Amid widespread suspicions that Musk’s Twitter account had been hacked or he was joking, Musk followed up with another tweet hours later suggesting a deal was imminent.
Musk defended the original tweet, saying it was a good-faith move to make sure all Tesla investors knew the automaker might be winding down its then-eight-year run as a public company.
“I meant no harm,” Musk testified. “My intention is to do the right thing for all shareholders.”
Guhan Subramanian, a Harvard business and law professor hired as an expert on shareholder lawyers, derided Musk’s method of announcing a potential acquisition as an “extreme anomaly” fraught with potential conflict.
“The risk is that the timing of Mr. Musk’s announcement of his (management buyout) proposal was to serve his own interests rather than the interests of the company,” Subramanian testified.
where is the money.
There’s another issue that could undermine Musk’s defense. According to the testimony of Musk, other witnesses and other evidence, he did not lock up financing for his proposed transaction or even determine how much money it would take to complete the transaction.
That’s one reason U.S. District Judge Edward Chen ruled last year that Musk’s 2018 tweets were false and directed a jury to look at them that way.
It also prompted regulators to accuse Musk of misleading investors through tweets, leading to a $40 million settlement with the Securities and Exchange Commission and requiring Musk to resign as Tesla chairman.
Chen ruled that the 2018 settlement, in which Musk did not admit wrongdoing, could not be brought up to the jury and has since lamented that he made a mistake.
Musk testified that he believed in a face-to-face meeting with Saudi Arabian wealth fund president Yasir al-Rumayyan on July 31, 2018, that he had verbally committed to providing any needed financing for Tesla’s acquisition.
This was further corroborated by the testimony of Deepak Ahuja, Tesla’s former chief financial officer, who participated in the discussion and gave al-Rumayyan a half-hour tour of the Tesla factory.
But after the “funding secured” tweet, al-Rumayyan sent Musk a text message showing that discussions about a Saudi fund funding a private acquisition appeared to be preliminary.
According to a copy filed as evidence at the trial, al-Rumayyan wrote to Musk saying: “I want to hear about your plan Elon and what the financial calculations are for taking it.”
Musk framed al-Rumayyan’s text as an attempt to renege on his previous promises. He also insisted that the Saudi fund had made a “clear commitment” to finance the acquisition.
After his 2018 tweet, Musk tried to secure the money needed for a Tesla acquisition with the help of Egon Durban, co-CEO of private equity firm Silver Lake, which helped finance Dell’s 2013 acquisition. acquisition. Musk also recruited Dan Dees, an executive at investment banking firm Goldman Sachs, which had worked closely with Tesla.
In the testimony, Durban and Dees discussed efforts to raise money for a broad range of potential investors, including two Chinese companies, Alibaba and Tencent, to buy Tesla in documents originally code-named “Project Turbo,” and then “Titanium plan.”
According to the documents, the amount needed for the acquisition ranged from $20 billion to $70 billion — a sum that both Durban and Diess testified never came close to being raised, largely because of Musk’s announcement on Aug. 24, 2018. A proposal to take Tesla private was canceled on Tuesday, after consultations with shareholders.
Adjusted for two stock splits, Tesla’s stock price is now eight times what it was then.
Musk still claims that if he wanted the money, he would have gotten it, and even if there was a funding shortfall, he could make up any shortfall by selling some of his shares in privately held SpaceX. That’s the tactic Musk used when he bought Twitter for $44 billion, in addition to selling about $23 billion of his Tesla stock.
Both Durban and Diess testified that they had no doubt that they could raise money for the acquisition — and former Tesla director Antonio Gracias agreed.
“He was the Michael Jordan of fundraising,” Gracias testified.
First published date: Jan 30, 2023 at 08:54 AM CST