Elon Musk defends tweets in San Francisco securities fraud trial

Alex Spiro, an attorney for Elon Musk, center, leaves court in San Francisco, California, U.S., on Tuesday, January 17, 2023.

Fanjoy Benjamin | Bloomberg | beautiful pictures

Tesla CEO Elon Musk appeared in San Francisco federal court on Friday defending tweets he posted to his tens of millions of followers in August 2018.

The tweets said he had “secured the funding” to take his electric vehicle company private at $420 a share and that “investor support” for such a deal had been received. “confirm”.

Trading in Tesla’s stock initially halted after the tweets, then the stock fluctuated wildly for weeks. musk later said that he has discussed with Saudi Arabia’s sovereign wealth fund and feels certain that the funding will be realized at his proposed price. An agreement never materialized.

The SEC charged Musk and Tesla with civil securities fraud following the tweets. Musk and Tesla each paid $20 million in fines to the agency and reached an amended settlement that required Musk to temporarily step down from his role as chairman of the board at Tesla.

His 2018 tweets also sparked a shareholder class action lawsuit from Tesla investors. They allege that Musk’s tweets mislead them and say that relying on his statements to make deals cost them a significant amount of money.

The shareholders’ transactions in question took place over the 10-day period before Musk appeared to concede a stand-alone deal won’t happen in 2018.

Musk swore on Friday that it was difficult to link Tesla’s stock price to his tweets.

“There have been many cases where I thought that if I tweeted something, the stock price would go down,” Musk said. “For example, at one point I tweeted that I thought, in my view, the stock price was too high…and it went higher, which is, you know, counter-intuitive.”

Trading volume surged after he tweeted

It is rare for top executives at publicly traded companies to discuss their stock prices because any comment can affect price movements.

Daniel Taylor, director of the Wharton Forensic Analysis Laboratory and a professor at the University of Pennsylvania, analyzed every transaction in Tesla stock that took place on August 7, 2018, the date Musk tweeted. He calculated the total volume of transactions per minute from the time the market opened until Musk’s tweets about the buyback.

Taylor found that the volume on the minute Musk tweeted, at 12:48 p.m. ET that day, was over $350 million, and the next minute trading volume for Tesla stock was over $250 million. la. For comparison, the average volume five minutes before Musk tweeted was $32 million per minute. One minute before Musk tweeted, the trading volume was $24 million.

“Generally speaking, correlation is not causation,” Taylor told CNBC on Friday, after Musk’s first day on the witness stand. “However, I am not aware of any alternative explanation for the 10x increase in trading volume on the same minute that Elon Musk tweeted.”

Musk also testified about his low stance towards short sellers on Friday.

“I believe short selling should be illegal,” Musk said, referring to short sellers as “the bad guys on Wall Street” who “steal” other investors. He said they also spread stories in the media to “make the stock go down” and would “do anything in their power to make a company die”.

Tesla was one of the most short-sold stocks in August 2018, when Musk made the announcement about taking Tesla private. Tesla stock price about 10% increase during the trading of that day. Short sellers face huge losses when a certain company’s stock moves higher.

Some of the plaintiffs in the ongoing trial argue that Musk’s “financial security” tweets were intended to put upward pressure on Tesla’s stock, leading to a so-called “squeeze.”

Musk’s testimony is still incomplete and the court is expected to hear him again on Monday.

CLOCK: Musk testifies via tweet

Tesla CEO Elon Musk to testify on 'funding guaranteed' tweets of 2018


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