Tesla’s former CFO backs up Elon Musk’s testimony in the “funding secured” tweet test


Tesla’s former chief financial officer Deepak Ahuja backed Tesla ( TSLA ) CEO Elon Musk’s claims while testifying in a federal shareholder lawsuit against Musk and Tesla executives on Wednesday.

The lawsuit, which says Musk and some board members should be held responsible for the stock price volatility in August 2018, alleges that Musk artificially inflated Tesla’s stock price when he tweeted that he was “providing financing” to take Tesla private.

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

“I didn’t,” said Ahuja. “It was consistent with the facts that I knew, the information that I had.”

August 7, 2018 Tweet from Elon Musk

To win their case, the shareholders must prove that at the time the tweets were written, Musk knew the information contained in them was materially false and that the information caused them to buy or sell Tesla stock to their detriment.

Grand 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 are therefore tasked with deciding whether the tweets are material — something a reasonable investor would rely on when making investment decisions — and whether they believe Musk’s tweets are true or false.

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

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

Ahuja explained that Musk did not attend a meeting in 2017 where PIF and Softbank, the founder of mobile telecommunications giant Masayoshi Son, expressed interest in investing in Tesla. Ahuja said both were “clearly aware” that the financial ramifications of their proposal would likely require an investment of $30 billion to $60 billion.

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

“Do you believe that is the correct statement?” Tesla’s lawyer asked.

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

SAN FRANCISCO, CALIFORNIA - JANUARY 24: Tesla CEO Elon Musk leaves the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California.  Musk testified in court in a lawsuit filed by investors against Tesla and Musk over tweets he wrote in August 2018, saying he took Tesla private with the financing he provided.  The tweet was found to be false, costing shareholders billions of dollars when Tesla's stock price began to fluctuate wildly based on the tweet.  (Photo by Justin Sullivan/Getty Images)

Tesla CEO Elon Musk leaves the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California. Musk testified in court in a lawsuit filed by investors against Tesla and Musk over tweets he wrote in August 2018, saying he took Tesla private with the financing he provided. It cost shareholders billions of dollars when the tweet was false and Tesla’s stock price began to fluctuate wildly based on the tweet. (Photo by Justin Sullivan/Getty Images)

Questioned by the shareholders’ lawyer, Ahuja acknowledged that Musk had not yet contacted legal or financial advisers when Musk emailed the board with the $420-per-share Tweet offer.

A shareholder attorney pressed Ahuja about not discussing a specific dollar amount for Tesla’s privatization at the July 31, 2018 meeting. However, according to Ahuja, Al-Rumayyan said “we are ready to act”, referring to the private deal.

Ahuja went on to say that the Saudi fund at one point understood that a private transaction would only require up to 50% of Tesla’s then-market capitalization. He said PIF’s Al-Rumayyan is likely to finance the deal alone, although it will turn to UAE-based funds if more capital is needed.

Ahuja acknowledged that the parties did not discuss potential regulatory hurdles, particularly whether US authorities would scrutinize and block PIF from owning a significant stake in Tesla, given legal restrictions on foreign investment in US-based companies.

Plaintiff shareholders questioned Ahuja about Musk’s testimony from the witness stand earlier in the week, saying his “funded” language meant he had the ability to sell his personal shares in SpaceX. In discussions he attended, Ahuja said he was not aware of an offer to raise capital from a SpaceX stock sale.

The statement continues. Judge Chen said the trial is expected to last three weeks.

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

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