Elon Musk’s infamous 2018 tweet was true

By Joel Rosenblatt | Bloomberg

Elon Musk’s claim that his now infamous 2018 tweet about privatizing Tesla Inc. was true has drawn skepticism from a judge.

The billionaire and his electric car company could soon face trial in a fight with shareholders who allege the Twitter post cost them billions of dollars in losses.

To push back against claims that the missive was fraudulent, Musk repeated in a court filing last month what he explained three and a half years ago: Saudi Arabia’s sovereign wealth fund had agreed to back his bid to privatize the company .

“It seems to me that it’s not very complicated actually,” U.S. District Judge Edward Chen said during a hearing Thursday in San Francisco. He added that although the Saudi fund had shown interest, “funding had not been secured”.

Parsing Musk’s intent behind the Twitter post is at the heart of a dispute over whether the statement was “unquestionably false”, as shareholders claim – or, as his lawyers say, whether it was “entirely truthful”. “.

The investors are asking Chen to decide some key legal issues on his own, without putting them to a jury. A ruling in favor of the investors would allow them to focus at trial solely on the connection between Musk’s alleged misrepresentation and their stock market loss.

In 2018, the tweet also got Musk and Tesla sued for fraud by the Securities and Exchange Commission. Musk is now seeking freedom from the restrictions on his tweets he agreed to as part of a settlement of this case. “I would never lie to shareholders,” Musk said this week in an affidavit to a New York judge hearing the SEC case.

“Let’s talk about the falsity,” Chen said at the start of Thursday’s hearing. Much of the ensuing debate focused on ‘Assured Funding’.

Alex Spiro, attorney for Musk, said shareholders were overthinking the tweet. “I worry too much about dissecting it,” he told Chen, adding that “context matters.” Importantly, Musk is wealthy enough to finance the privatization transaction himself, Spiro said.

“None of Mr. Musk’s deals ever had a funding problem,” he told the judge. The entrepreneur – now the richest person in the world – has “great personal resources that he can put to good use”. On the contrary, shareholders interpreted Musk’s tweet to mean “Elon might bid to take it private,” Spiro said.

Nicholas Porritt, a lawyer representing the shareholders, focused on the past of the last word of the tweet. “Secure,” Porritt said, “means it’s in the bag, locked, and loaded.”

Yet Musk never spoke to potential investors other than the Saudi fund, from which he intended to take only a small stake in the unformed transaction, Porritt said. “It was all so tentative, so illusory at the time, that he never had a clue how much money it would take,” the attorney said.

Chen also had doubts.

There was no term sheet with the Saudi fund, no price and no stated conditions, Chen said. “A lot of things hadn’t been discussed, it seemed quite preliminary,” he said, adding, “How can there be a quote, an agreement, even if it’s an agreement handshake?”

The judge said he would make a final decision later.

The case is In re Tesla Inc. Securities Litigation, 18-cv-04865, US District Court, Northern District of California (San Francisco).

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