Elon Musk expected strong financial backing when he tweeted that he would take Tesla private in 2018, but lacked concrete commitments from potential backers, according to testimony he gave on the third day of his trial in federal court in San Francisco.
Musk is accused of defrauding investors by driving up Tesla’s stock price by announcing on Twitter on August 7, 2018 that he had “secured funding” to take the electric car maker private.
The trial is testing whether the world’s second-richest person can be held liable for his use of Twitter. Millions of dollars are at stake for shareholders who claim to have suffered losses after Musk tweeted that “investor support confirmed” for the deal.
Tesla’s stock price rose after Musk’s tweets and later fell as it became clear that the buyout would not happen.
Musk told the jury on Tuesday that he could have used several sources of funding to take Tesla private, from existing shareholders such as Oracle Corp co-founder Larry Ellison to Saudi Arabia’s sovereign wealth fund or his own wealth.
“Funding was absolutely not an issue,” Musk said. “It was quite the opposite.”
Musk, however, acknowledged that he had no binding agreements with investors, leaving it up to a jury to decide whether he misled shareholders.
A nine-member jury will decide whether Tesla’s CEO artificially inflated the company’s stock price by citing the prospect of a buyout.
In response to questions from his lawyer, Alex Spear, Musk said his tweet was intended to inform investors of his interest in taking Tesla private. Musk said he had already discussed his interest with Tesla’s board and Saudi Arabia’s sovereign wealth fund and feared it would be leaked to the media.
“I had no bad motive,” he said. “My intention 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 that he decided to abandon the idea of taking the company private after receiving feedback from shareholders.
“After speaking with a number of investors, especially smaller investors, they said they would prefer Tesla to remain public and I felt it was important to respond to their wishes,” Musk testified.
The jury was shown notes and documents from a board meeting in the days following a tweet in which Goldman Sachs, which worked with Musk on the proposed deal, indicated there would be more than enough funding to take the company private.
Goldman Sachs did not immediately respond to a request for comment.
But when asked by Nicholas Porritt, the investor’s attorney, Musk said he had no binding financing agreements from any interested parties.
Musk repeatedly resisted “yes” or “no” answers Porritt asked about discussions of the Saudi fund’s funding pledges, at one point prompting a judge to assist in the questioning.
“Was there a specific number discussed?” asked the judge.
“It’s not a specific number,” Musk said.
On Monday, Musk said he was able to finance the deal by selling his stake in SpaceX, the airline where he is chief executive. He also said he believed the funding was promised by a Saudi fund before they pulled out.
The tweet has already resulted in a $40 million settlement with securities regulators.
After it became apparent that the money wasn’t there to take Tesla private, Musk resigned as Tesla’s chairman while remaining CEO as part of a settlement with the Securities and Exchange Commission, without admitting any wrongdoing.
The trial is scheduled to continue next week with testimony from board members and Tesla experts.
Reuters contributed to this report