Tesla’s former CFO backs Elon Musk’s testimony in ‘funding-secured’ tweet lawsuit

Tesla’s former chief financial officer, Deepak Ahuja, supported the claims of Elon Musk, CEO of Tesla (TSLA), during testimony on Wednesday in a federal class action lawsuit filed by shareholders against Musk and Tesla directors.

The case, which says Musk and certain board members should be held liable for stock price volatility in August 2018, alleges that Musk artificially inflated Tesla’s stock price when he tweeted that he had “secured funding” to take Tesla private. to fetch.

“When you saw this tweet, did you think it was a lie, sir?” asked a lawyer for Musk and the directors for testimony during the fifth day of the trial.

“I didn’t,” Ahuja said. “This matched the facts I knew, the information I had.”

August 7, 2018 Tweet from Elon Musk

August 7, 2018 Tweet from Elon Musk

To win their case, the shareholders must prove that Musk knew at the time of the tweets that the information contained therein was materially inaccurate and that the information led them to buy or sell Tesla stock to their detriment.

Senior District Court Judge Edward Chen, who is presiding over the case, has already ruled and instructed the nine-member jury that Musk’s funding statement was untrue. Jurors must therefore decide whether the tweets were material — those that a reasonable investor would rely on when making investment decisions — and whether Musk believed his tweets were true or false.

Ahuja said that by the time of Musk’s “funding secured” tweet, he and Musk believed Saudi Arabia’s Public Investment Fund (PIF) was willing to fund a full take-private transaction. Ahuja said the understanding was based on a history of meetings he, Musk and others at Tesla held with PIF representative Yasir Al-Rumayyan dating back to March 2017.

“My impression was that even if there was no other investor, they were willing to finance the deal to go private,” said Ahuja.

Ahuja explained that Musk did not respond to an earlier meeting in 2017 in which Masayoshi Son, the founder of mobile telecom giant PIF and Softbank, expressed interest in investing in Tesla. Both “clearly understood” that the financial implications of their proposals would likely require investments of $30 billion to $60 billion, Ahuja said.

More than a year later, on July 31, 2018, Ahuja said that Musk had decided to go through with the PIF’s privatization offer. Days later, on August 3, he brought the proposal to Tesla’s board. Musk’s communication to the board, Ahuja said, explained that the PIF was willing to fund the entire transaction.

“Did you think that was a truthful statement?” Tesla’s lawyer asked.

“That’s it,” Ahuja replied. “The board of directors gave due and serious consideration to Elon’s proposal.”

SAN FRANCISCO, CALIFORNIA - JANUARY 24: Tesla CEO Elon Musk exits the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California.  Musk testified at a lawsuit about investors suing Tesla and Musk over his August 2018 tweets in which he said he was taking Tesla private with funding he secured.  The tweet turned out to be false and cost shareholders billions of dollars when Tesla's share price began to fluctuate wildly, supposedly based on the tweet.  (Photo by Justin Sullivan/Getty Images)

Tesla CEO Elon Musk exits the Phillip Burton Federal Building on Jan. 24, 2023, in San Francisco, California. Musk testified at a lawsuit about investors suing Tesla and Musk over his August 2018 tweets in which he said he was taking Tesla private with funding he secured. The tweet turned out to be false and cost shareholders billions of dollars when Tesla’s stock price began to fluctuate wildly, supposedly based on the tweet. (Photo by Justin Sullivan/Getty Images)

After questioning by shareholder counsel, Ahuja admitted that when Musk emailed the board with the tweeted $420 per share proposal, Musk had not yet engaged legal or financial advisors.

The shareholders’ lawyer urged Ahuja that a specific dollar amount to delist Tesla was not discussed at the July 31, 2018 meeting. However, according to Ahuja, Al-Rumayyan said “we are ready to act regarding the readmission agreement.

Ahuja later said that the Saudi fund at one point indicated it understood that a private transaction would require money totaling as much as 50% of Tesla’s market capitalization at the time. He said the PIF’s Al-Rumayyan indicated it would likely fund the deal on its own, but would reach out to UAE-based funds if more capital was needed.

Ahuja admitted that the parties had not discussed potential regulatory hurdles, specifically whether U.S. authorities would investigate and potentially block PIF from owning a significant stake in Tesla given regulatory restrictions on foreign investment in U.S.-based businesses.

Plaintiff shareholders also questioned Ahuja about Musk’s testimony on the witness stand earlier this week, in which he said his “funding assured” language included a possibility that he could sell his private stock in SpaceX to secure a private deal. finance. In discussions he was involved in, Ahuja said, he had not been made aware of a proposal that would involve shares from the sale of SpaceX stock.

Testimony is underway. Judge Chen said the trial is expected to take three weeks.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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