Elon Musk’s attorney, Alex Spiro (Center), appears in court in San Francisco, California, USA, Tuesday, January 17, 2023.
Benjamin Funjoy | Bloomberg | Bloomberg | Getty Images
Tesla CEO Elon Musk He appeared in San Francisco federal court on Friday to defend a tweet he posted to his tens of millions of followers in August 2018.
The tweet said it had “secured funding” to take the electric vehicle company private at $420 a share, and that “investor support” for such a transaction was “confirmed.”
Trading in Tesla’s shares initially halted after the tweet, and the stock became highly volatile over the next several weeks.Musk later said He said he was in talks with Saudi Arabia’s Sovereign Wealth Fund and was confident the funding would take place at the price he suggested.
The SEC indicted Musk and Tesla for civil securities fraud after the tweets. Musk and Tesla each paid his $20 million fine to the company and entered into a modified settlement agreement requiring Musk to temporarily relinquish his role as chairman of Tesla’s board.
His 2018 tweet also triggered a shareholder class action lawsuit by Tesla investors. They claimed Musk’s tweets misled them and said relying on his statements to make a deal would cost them a lot of money.
The shareholder deal in question took place in the 10 days before Musk appeared to have admitted that no private deals would take place in 2018.
Musk said under oath on Friday that it was difficult to tie Tesla’s stock price to his tweet.
“A lot of times I thought that if I tweeted something, the stock would go down.” For example, at one point I tweeted that I thought the stock was too expensive in my opinion… It was the opposite.”
Trading volume increased significantly after he tweeted
Management of publicly traded companies rarely discuss stock prices.
Daniel Taylor, director of the Wharton Forensics Analytics Lab and professor at the University of Pennsylvania, analyzed all Tesla stock trading that occurred on August 7, 2018, the day Musk tweeted. He calculated the total volume of trades per minute from the time the market opened until Musk tweeted about the buyout.
Taylor said trading volume exceeded $350 million at 12:48 p.m. I discovered that it exceeded the dollar. By comparison, five minutes before Musk tweeted, his average volume was $32 million per minute. Just before Musk tweeted, he had $24 million in trading volume.
“It’s generally true that correlation isn’t causation,” Taylor told CNBC Friday after Musk’s first day of witnessing. “But I am not aware of another explanation for a 10-fold increase in trading volume in the same moment Elon Musk tweeted.”
Musk also testified about his low opinion of Friday’s short sale.
“I think short selling should be made illegal,” Musk said, calling short selling “steals” and “wall street villains” from other investors. He also planted articles in the media to “depress stock prices” and said that they would “do anything in their power to bring the company to its death.”
Tesla was one of the most shorted stocks in August 2018 when Musk released a statement about taking Tesla private.Tesla stock price about 10% increase during the day’s trading. Short sellers face huge losses when the stock price of a particular company rises.
Some plaintiffs in the ongoing trial allege that Musk’s “funding secured” tweet was intended to put upward pressure on Tesla shares causing a so-called “short squeeze.” .
Musk’s testimony is not yet complete and the court is scheduled to hear from him again on Monday.
