Elon Musk disputed that his frequent Twitter posts necessarily moved Tesla’s stock price, as he began testifying on Friday in a trial over whether his 2018 “funding secured” tweet illegally manipulated the electric-car maker’s value.
Wearing a dark suit and tie, Musk was called to the witness stand late on Friday, the third day of a closely watched trial in a federal court in San Francisco scrutinising the impact of Musk’s 2018 tweets saying he had the necessary funding to take Tesla private. No deal ever materialised, prompting shareholders to sue Musk, Tesla and the company’s board of directors at the time.
An attorney for the shareholders, Nicholas Porritt, pressed Musk on whether he agreed that his posts on the social network — which he now owns — influenced the market.
“It’s difficult to say the stock price is linked to the tweets,” Musk said, suggesting that just because he posted information or thoughts did not mean “people believe it”.
In the moments and days following Musk’s “funding secured” tweet on August 7 2018, Tesla’s stock price was extremely volatile, and fell sharply when it became clear a plan to have Saudi backers fund a go-private effort would not go ahead.
The trial in the class action lawsuit, which is expected to last another two weeks, alleges the cost to investors could run into the billions of dollars.
Musk described his Twitter account as the most “democratic” way to reach his retail investors, describing that cohort as the most “loyal” supporters of the company.
“But obviously there is a limit to what you can say,” he added. “You can obviously be far more verbose in a filing. Everyone on Twitter understands that.”
Stating “correlation is not causation”, Musk cited an instance in May 2020 when he posted on Twitter that Tesla’s stock price was “too high”. He said, contrary to logic, the carmaker’s stock price “went up” after the tweet, despite his warning.
Trading data show Tesla’s share price closed down 10 per cent on the day of that tweet, though did stage a recovery the following business day.
Musk acknowledged that his tweets were subject to the same securities laws as other statements from Tesla, such as financial filings or press releases. The US Securities and Exchange Commission in 2018 fined Musk and Tesla $20mn each over the “funding secured” tweets, and forced him to step down as board chair.
Porritt noted that several people in Musk’s inner circle — including Ron Baron, a big investor in Tesla — had suggested he take a step back from using the platform he would years later come to own.
Continuing his long-held and often-stated resentment of short selling, Musk directly addressed the jury to explain that a “short seller” was not a “seller of short stature”, but a “bunch of sharks on Wall Street” who wanted to see Tesla fail.
Musk will return to the witness stand on Monday morning for further questioning.
Earlier on Friday the court heard from Harvard Law School professor Guhan Subramanian who testified that Musk’s tweet circumvented the typical disclosures that would be made about a big business deal.
Subramanian said the approach was “incoherent” and an “extreme outlier”, according to Reuters.