Tesla Inc’s board had no obligation to review CEO Elon Musk‘s 2018 tweets announcing a bid to take the electric car maker private, which investors allege were fraudulent, two independent directors testified at trial on Wednesday.
Mr. Musk‘s Aug. 7, 2018 tweets sent Tesla stock soaring and after they fell back down, shareholders sued, alleging they lost money. But board members James Murdoch and Ira Ehrenpreis each said the tweets did not need to be vetted by the company before Musk sent them because he had done so in his individual capacity.
Their testimony concluded live witnesses in the trial, which began in San Francisco federal court on Jan. 17.
Mr. Musk tweeted that he had “funding secured” to take the carmaker private at a $420 per share price, a premium of about 23% to the prior day’s close. The stock price soared after the tweet and then fell as it became clear the buyout would not happen. Tesla shareholders say they lost billions of dollars on their investments in stocks and other securities of the company.
The trial is testing whether Elon Musk, the world’s second-richest person, can be held liable when his sometimes impulsive use of Twitter rubs up against US Securities and Exchange Commission rules about corporate disclosures.
The two board members are named as defendants in the lawsuit. Their attorneys, who also represent Mr. Musk and Tesla, have asked the judge overseeing the case to toss allegations against them and other board members including Kimbal Musk, Elon Musk‘s brother, saying the investors failed to prove they are liable.
James Murdoch, son of media tycoon Rupert Murdoch, told the jury the tweets were consistent with what he knew about Musk‘s talks with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund.
“They had great confidence in the availability of funding for such a transaction,” he said, referring to Mr. Musk and then Tesla CFO Chief Financial Officer Deepak Ahuja.
Mr. Musk testified last week that “funding was absolutely not an issue.” He acknowledged, however, that he did not have binding agreements with investors for specified amounts, leaving it to the jury to decide if he misled shareholders.
Both sides will make their closing arguments on Friday, after a day off. A jury of nine is expected to begin deliberating on Friday.
The jury will decide whether the Tesla CEO artificially inflated the company’s share price by touting the buyout‘s prospects, and if so, by how much.
The buyout deal never came together because investors, particularly retail shareholders, expressed their interest in keeping the company public, according to testimony by Mr. Musk. – Reuters