Elon Musk, CEO of Tesla, testified in a federal securities fraud trial regarding his tweets from 2018 in which he claimed he had "Funding secured" to take the company private.
Engadget reports that Elon Musk said that just because he tweets something, it "does not mean people believe it or will act accordingly."
Shareholders are claiming that a false claim that he had financing to take Tesla off the public markets caused them to suffer severe losses and financial harm in the billions of dollars.
The case outcome will depend on the significance of the claims to subsequent market movements and the degree to which investors relied on Musk's tweets when making the trades that resulted in a loss of capital for them.
If the jury decides that Musk, Tesla, or both are responsible for the losses, they will have to determine how much responsibility each defendant bears for them. Additionally named in the lawsuit are several current and former members of Tesla's board of directors.
Elon Musk Defends Controversial 2018 Tweet
Musk maintained throughout his testimony that everyone does not necessarily believe his tweets and that it is common knowledge that a tweet is understood not to be comprehensive.
He stated that he uses his Twitter feed for public disclosures and "memes" and finds it an effective way to communicate with customers about products and answer their questions.
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Musk's testimony also strongly criticized short sellers, stating that short selling should be banned. He believes that short-selling artificially lowers stock prices, which harms companies and their shareholders.
According to CNBC, Tesla was one of the most heavily shorted stocks in August 2018, when Musk announced his intention to take Tesla private. During that day's trading, Tesla's stock price increased by about 10%, and short sellers suffered massive losses.
The Securities and Exchange Commission (SEC) sued Musk in September 2018 for allegedly misleading investors about the "Funding secured" claim. Musk and Tesla eventually settled, each paying $20 million in fines, and Musk agreed to step down as Tesla's board chairman.
The 2018 'Funding Secured' Tweet
On August 7, 2018, Musk tweeted: "Am considering taking Tesla private at $420. Funding secured." He followed that with a subsequent tweet, also referenced in court documents, reading, "Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote."
However, Musk's claim crumbled in the days following, and it became clear that no funding had been secured and that the tweet was misleading. This caused investors who had made trades based on the false information in the tweet to become confused and panicked.
Later, the CEO revealed that he was in talks with Saudi Arabia's Public Investment Fund, which had expressed interest in Tesla as part of the country's efforts to reduce its reliance on oil. However, the deal did not go through, and he later wrote a detailed post on Tesla's website stating that it would remain public.
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