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Elon Musk testifies Saudis wanted to take Tesla private, $420 buyout tweet not a joke

Yahoo Finance’s Alexis Keenan joins the Live show to break down the latest surrounding Elon Musk’s Tesla trial.

Video transcript

JULIE HYMAN: Let's talk about someone who maybe has some anger issues. I don't know. That's--

[LAUGHTER]

--a subject of another debate. Elon Musk told jurors during his ongoing securities fraud trial that he was sure he had secured financial support from Saudi investors in 2018 to take Tesla private and that his "funding secured" tweet back then was not a joke.

Yahoo Finance's Alexis Keenan has the latest. It's hard to know, Alexis-- I'm not mad at you for sure.

ALEXIS KEENAN: Thank you.

JULIE HYMAN: It's hard to know if he's sort of rewriting history here, but what did he say in the courtroom?

ALEXIS KEENAN: Yeah, so he basically gave two reasons why he said he thought that his tweet was true. And, of course, we'll show it on the screen. We're talking about that now. Which he also called infamous tweet in August of 2018 when he said he had funding secured to take Tesla private at $420 per share. He said that the price, to your intro there, that it was a coincidence that it fell at $420. So, well, take it or leave it.

So this is a suit where Tesla shareholders say that that tweet caused them to lose money because they bet on the stock when it was artificially pumped up when that comment was made and then fell back down over a 10-day period, and we have a chart there to show that. But first, Musk's two main arguments here. I would say one is that he said the Saudi Arabia public investment fund had made a verbal commitment to help him take the company private. He said he then got concerned when he got news that a "Financial Times" report was coming out that would disclose that the Saudi fund had acquired a 5% stake in the company. That was nonpublic information at the time. He said he wanted to get out ahead of any additional news that this news organization might have, and so he sent this tweet because he had already been engaged in discussions with the Saudi fund months and months before that.

Now secondly, Musk also said that he had another backstop, and that, he said, was that he could sell-- he said it would break his heart to do so, but he could sell SpaceX shares in order to fund the deal. Also said that he had a funding commitment from Larry Ellison.

Now, time for the legal lesson. What Musk actually believes about the truth of that statement and some other tweets that followed, that's what the key is here because the judge in this case, oddly enough, has already ruled that the statement is false. He's not going to let the jury decide if it is or it isn't. He said it was false.

So here are the elements of the case. To win, the shareholders have to prove that the tweet was materially false. Got that one thanks to the judge. Second, that Musk knew it was false, and third, that it caused the shareholders to buy or sell the stock to their detriment. So that is why Musk is talking so specifically about what he thought about those tweets.

Two admissions, importantly, also came from Musk yesterday on the stand. He said that the fund had not signed any official documents to memorialize this funding. He also said that he did think that the stock price would possibly increase on this news. He also admitted that he sought no particular legal and financial advice to try to put together this deal. And so the lawyers for the shareholders was making the point that, well, why would you tweet that funding was secured if he hadn't even had those professional consultations, as would normally be done in the regular course?

BRAD SMITH: Just kind of backing out, what's the-- what's at risk with this trial, particularly here from Musk?

ALEXIS KEENAN: Yeah, so the shareholders have not specified a dollar amount of damages in this case, but, with the help of Jared Blikre, we have put together the market fluctuation during the time that the shareholders say, this 10 days, August 7 through the 17th of 2020-- 2018. They say that they-- that that was the time during which they bought or sold shares to their detriment.

That time period comes out to a fluctuation in market cap of about $12.6 billion, but that is up to the jury to decide. If Musk is held liable, then the jury gets to figure out what the dollar amount of those damages is. That's a calculation that's a really tricky one for any jury, I would say.

JULIE HYMAN: Now I'm curious. If they're trying to make the case that, in fact, he knew that the funding was not secured, are we going to hear testimony from the Saudis, for example--

ALEXIS KEENAN: No.

JULIE HYMAN: --or from, say, a Larry Ellison or whoever he would talk to if he was actually considering selling a SpaceX stake?

ALEXIS KEENAN: That was a big point that went on during Musk's testimony from both sides yesterday, and that is that Musk's attorney did try to subpoena representatives of the Saudi fund. Of course, they're outside of the jurisdiction of the United States. They did not show up, and they probably will not show up at this point in the--

JULIE HYMAN: Proceedings.

ALEXIS KEENAN: --case, yeah. So no. So that that's a problem for him, right? And Musk said-- he said to the shareholders' lawyer during his testimony, he said you would lose your case. It would fall apart if we were able to call these representatives--

JULIE HYMAN: How convenient for him--

ALEXIS KEENAN: --and they had to testify under--

JULIE HYMAN: --to say that, isn't it?

ALEXIS KEENAN: Yes, yes, yes. So that's not going to happen. As far as Larry Ellison, we'll see if he is going to testify.

Musk is still on the stand, so his testimony will pick up again at about 11:30 Eastern time today.

BRAD SMITH: All right, we're keeping tabs on this. We know you are as well. Yahoo Finance's own Alexis Keenan, thanks so much for breaking that down for us.