tesla (TSLABoard members testified Wednesday that Elon Musk’s 2018 Twitter posts about taking the electric vehicle company private were consistent with what he recounted to the board about a potential going private deal.
external director james murdochson of film and television titan Rupert Murdoch, he took the podium among other former or current members of the board.
The testimony is part of the class action lawsuit filed by company shareholders who say they traded Tesla shares to their detriment based on the tweets. They claim that Musk and the directors are responsible for paying billions of dollars in damages.
On August 7, 2018, Musk aware to the social networking site that it had “funds secured” to take Tesla private. While the deal never materialized, Musk maintains that at the time he believed, based on a series of meetings with Saudi Arabia’s Public Investment Fund (PIF), that his authorized representative made an “unequivocal” verbal commitment to the transaction.
Murdoch, named as a defendant in the case, told jurors that on August 2, 2018, five days before Musk’s first disputed tweet, Musk emailed the board to communicate an offer to take Tesla private at $420. per share.
Murdoch characterized Musk’s email as “serious” and explained that the board immediately called a special meeting, without Musk as a potential bidder, to discuss the deal.
Tesla then-CEO Deepak AhujaMurdoch said, communicating to the board that Musk’s vision for the transaction would primarily include financing from the Saudi Arabian Sovereign Wealth Fund and potentially include investments from existing Tesla shareholders who could choose to convert their public investments into private equity.
“I thought it was novel… and maybe difficult,” Murdoch said, adding that he later invited Musk to a gathering at his home where the two “talked about that dynamic.”
The next day, on August 3, 2018, Murdoch said the board met again, this time with Musk included. He testified that Musk and Ahuja expressed that funding was abundant and that the PIF had expressed a clear level of intent.
“Were you surprised that Musk expressed confidence in funding through the Saudi PIF?” Musk’s lawyer asked Murdoch, based on his own financial dealings with Middle Eastern investment funds.
“No,” Murdoch replied.
Former Tesla CEO linda johnson ricealso named as a defendant in the lawsuit, told jurors that she also recalled Ahuja’s presentation to the board about the PIF’s interest in taking Tesla private.
“It was my understanding that Musk had discussed this transaction with the PIF,” Johnson Rice said of the Aug. 2 meeting, “and they were interested and very sincere in wanting to finance the transaction.”
Tesla’s current CEO Ira Ehrenpreis testified that during the August 2 and 3 meetings, Ahuja and Musk respectively told the board that only the PIF could finance the entire transaction and that Musk’s tweets were consistent with his email to the board. Regardless of the Saudi funding, however, Ehernpries added that Musk had “more than enough interest” from investors and that the PIF was probably not Musk’s only avenue to take Tesla private.
Ehernpreis admitted under cross-examination that he was not aware of any particular funding commitment, or funding price, that would be required to take Tesla private at the time of Musk’s postings.
Musk’s brother, a non-Tesla director, also named in the lawsuit, testified that he deliberately did not attend the initial board meeting because their family relationship created a conflict of interest. On cross-examination, he admitted that he asked his brother to be more considerate in his use of Twitter.
Other Tesla directors named in the lawsuit include former board members Brad Buss and Antonio Gracias, and current member Robyn Denholm.
Shareholders are tasked with proving that, at the time of the tweets, Musk knew that the information contained in them was false and material, information that a reasonable investor would rely on to make investment decisions. They must also prove that the information led them to buy or sell Tesla stock to your detriment.
The defense on Wednesday rested its case. Closing arguments are scheduled for Friday, after which the case’s nine-member jury is expected to begin deliberations.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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