Elon Musk justifies ‘funding secured’ tweet during Tesla trial

How do you know when a “handshake” deal is complete?

Elon Musk has an analogy for this.

On the witness stand Monday, defending his 2018 Tesla Take Private tweets, Musk explained, If a bank tells you they will support your desire to buy a home, and then you agree, a home to buy it, the bank will give you a mortgage as a matter of course. “They’re still doing this paperwork to go through with the transaction, but the transaction goes through,” he said in court at his fraud trial.

For a man who recently sold $62 million in Bel Air mansions, Musk has some ill-informed ideas about how real estate transactions work. At least for most people.

The analogy sparked a bit of amusement from the attorney representing investors who say Musk cheated them.

“When I bought my house, I got a letter of acceptance from a bank,” said plaintiff attorney Nicholas Porritt. “You Maybe you can buy a house without a letter of approval from a bank, but the rest of us understand that you need a letter of approval from the bank before you start bidding.”

Musk was quick to drop the analogy. “That’s not how things work with a sovereign mutual fund,” he said, moving on to other explanations for the use of the word “funding secured.” February 7, 2018, tweet for a take Tesla private deal that never materialized and was never shown to actually have funding secured.

Funding was to come from Saudi Arabia’s gigantic Public Investment Fund. Musk testified that a previous agreement that included a Saudi purchase of 5% of Tesla shares was done as a handshake deal, so Musk said in the private discussion, “It’s reasonable to assume you would shake hands and that was it.”

Musk had discussed the take-private deal with PIF boss Yasir Al-Rumayyan in 2018, a week before his tweet. But in his statement Monday, Musk acknowledged that no financial terms were agreed. After the “funding secured” brouhaha, Al-Rumayyan asked Musk for more financial information on the deal, then canceled it. Musk told the court that Al-Rumayyan “didn’t live up to his word.”

Investors say they believed Musk’s tweet was genuine, and they lost big bucks when the stock’s market value plummeted billions of dollars in response.

No one but Musk was involved in the potential deal, saying they believed funding was secured, including the Saudi fund.

Trial Judge Edward Chen of the US District Court in San Francisco instructed the jury in the current case to rule that the “funding secured” tweet was false. Four years ago, Musk signed a settlement with the Federal Securities Commission in the wake of the tweet. Under this deal, the US Securities and Exchange Commission cannot call Musk a fraud, and Musk cannot say he was acquitted of fraud charges.

The current case could relate to whether the jury believes Musk knew it was wrong when he tweeted it.

Though Musk was reticent, often speaking in fragmented and halting sentences at the urging of the investors’ attorney, he was significantly more confident when questioned by his defense team.

“I am accused of having made materially false statements. I am accused of fraud. It’s outrageous,” he said.

The defense focused on the first sentence of Musk’s “funding secured” tweet, which read in full: “I’m considering privatizing Tesla for $420.” Funding secured.” Musk emphasized that his interest in privatizing the company is genuine. However, the lawsuit doesn’t allege that Musk had no intention of taking the company private, instead focusing on whether funding was secured.

He previously said the funding is secured because he owns a large stake in the rocket company SpaceX and because SpaceX may also invest in Tesla.

Musk returns to the witness stand on Tuesday.

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