Tesla (TSLA) CEO Elon Musk testified on Monday that concern over a pending news report was “the driving factor” behind his decision to post a series of 2018 tweets at the heart of a class-action lawsuit brought by Tesla stockholders.
The testimony, and other statements from Musk on his second day of questioning, offered his rationale for posting on the social media site that he was considering taking the electric vehicle company private at $420 per share and had secured funding for such a deal.
“It was concerning because this information was not public,” Musk said about advance notice he received that the Financial Times planned to report on Aug. 7, 2018 — the day of his initial tweet — that Saudi Arabia’s Public Investment Fund had acquired a 5% ownership stake in Tesla.
According to the shareholders, Musk illegally manipulated the stock price and he and Tesla's board should be held accountable for an unspecified portion of billions of dollars in damages sustained by those who bought or sold the company's stock after the tweet and up until Aug. 17, 2018.
Musk said at that time he had already received a verbal, though “unequivocal,” commitment from the Saudi fund to finance a take-private deal. Worried that the news story would reveal the purported accord, Musk said he sent the tweet to ensure all investors had access to equal information.
The Saudi fund’s representative, Yasir Al-Rumayyan, later denied through media reports and in a private text message to Musk that funding was assured.
“This is ass covering,” Musk said of Al-Rumayyan’s text. “It does not describe the reality of the situation.”
Musk’s lawyers failed to compel testimony from the fund’s representatives who are outside U.S. jurisdiction. Under questioning, Musk accused the shareholders of deliberately choosing not to solicit testimony from fund officials.
Musk admitted that none of the Saudi fund officials signed any documents reflecting funding for the take-private transaction. He also said that no particular amount of funding had been talked about in his meetings with its executives.
“There was no price discussed, no documents signed,” Musk said. “It was just verbal.”
Because the fund went forward with Musk’s earlier suggestion to buy 5% of the company's shares to show the fund's commitment to taking Tesla private, Musk said he expected that the fund would also make good on the verbal commitment.
Musk also admitted that he anticipated a rise in Tesla’s stock price in response to his tweet, though he stuck to his position that — in his understanding — funding had been secured. He also said repeatedly under questioning that it’s difficult to correlate his tweets with the company’s stock price, since in the past the theory has proven counterintuitive.
“My tweet was truthful — absolutely truthful,” Musk said.
To further back up his claims, Musk said that Saudi funding wasn’t crucial to privatize Tesla. His SpaceX shares and a commitment from Oracle cofounder Larry Ellison were sufficient “backstops” to secure adequate financing for him to take control of the company.
“I felt that there was sufficient support that funding was confirmed,” Musk said.
Following questioning from Tesla's shareholders, Musk began answering questions from his own lawyer, Alex Spiro. Spiro highlighted Musk's track record for successfully raising billions of dollars in investment funds for his multiple ventures.
In a separate case brought by the U.S. Securities and Exchange Commission in response to the funding tweet, Musk and Tesla settled the matter, each paying a fine of $20 million. Musk also agreed in the accord to step down as Tesla's board chairman and to have Tesla's general counsel review potentially "material" tweets before they are posted. Musk is currently seeking to have that part of the settlement dissolved.
Musk's testimony is expected to continue Tuesday.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.