Elon Musk gets serious about 420 in securities fraud lawsuit

Elon Musk insists 420 is no joke to him.

In testimony during his ongoing securities fraud lawsuit on Monday, Musk argued that the $420 per share price he quoted back in his infamous 2018 “funding assured” tweet was not a weed joke, but really just a coincidence — with a hint of karma.

Musk was asked about the proposed share price by Nicholas Porritt, an attorney for a group of Tesla investors who are suing the billionaire’s CEO for the loss of millions of dollars they say resulted from his failed attempt to take Tesla private. And it sparked an eyebrow-raising response from Musk about what he considered a serious proposal, despite almost everyone taking it as an obvious reference to cannabis.

“You rounded up to 420 because you thought that would be a joke your girlfriend will enjoy, isn’t that right?” Porritt asked. “No,” Musk said, adding, “there’s some, I think, karma around 420. I’d have to wonder if that’s good or bad karma at this point.”

Porritt, sounding incredulous, asked again if the $420 was meant as a joke. “420 was not chosen because of a joke,” Musk said. “It was chosen because there was a 20 percent premium to the share price.” He also argued that it was a “coincidence”.

Musk posted the fateful tweet on August 7, 2018, on what he said was a “firm commitment” by the Saudi Arabian Public Investment Fund (PIF) to take Tesla private. At the time, the company was “attacked” by “Wall Street sharks” and short-sellers who bet on the failure of his business, and Musk said he was simply trying to protect his future.

But Porritt pointed out that there were no signed documents with the Saudis, really nothing more than a handshake, and that Musk posted the tweet without consulting his own board and without considering how it could negatively affect Tesla shareholders.

“Before you tweeted ‘investor support confirmed’, you didn’t know if investor support was actually confirmed, did you?”

“Before you tweeted ‘investor support confirmed’, you didn’t know if investor support was actually confirmed, did you?” Porritt asked. He later said, “By tweeting ‘investor support confirmed’ you meant to communicate that ‘Elon Musk support confirmed’.”

The trial hinges on whether the jury believes Musk may have to pay billions of dollars in damages to shareholders for the money they lost as a result of his tweets. Musk has already agreed to a $40 million settlement with the Securities and Exchange Commission over the tweets, though that settlement did not require him to admit any wrongdoing. (Musk has since argued that he was forced into that settlement.)

Even before Musk took the stand, Judge Edward Chen ruled that the jury should find Musk’s 2018 tweets false. With that assumption, jurors will have to decide whether Musk misled shareholders with his tweets and caused them to lose money.

Speaking in a soft, hesitant tone and sometimes complaining of “severe” back pain, Musk argued that he was not relying solely on a commitment to the Saudi PIF when he tweeted “funding secured.” He argued that his shares in SpaceX would also help fund the deal to take Tesla private, noting that he sold nearly $23 billion worth of Tesla stock to fund his takeover of Twitter — a deal that he unsuccessfully tried to get out – demonstrating his willingness to use his various businesses to fund his business deal.

“Just like I sold shares in Tesla to buy Twitter… I didn’t want to sell Tesla shares, but I did sell Tesla shares,” he said. “My SpaceX shares alone would have meant funding was secured.”

There were some brief fireworks when Musk accused Porritt of failing to subpoena PIF officials to notify the Saudis of talks with Musk. “The interesting question for you, sir, is why you didn’t subpoena him? Because if you did, it would destroy your business,” Musk said. Porritt said the prosecutor’s team sent court handlers to Saudi Arabia, but Judge Chen quickly stopped the brawl.

“My SpaceX shares alone would have meant funding was secured.”

A moment of levity came when Porritt mistakenly referred to Musk as “Mister Tweet,” which Musk admitted was “appropriate.”

During his testimony, Musk likened the deal to buying a home with PIF as his mortgage lender. “No documents were signed, but they agreed to buy 5 percent of Tesla,” Musk said of the PIF.

“So you would expect less documentation for a private transaction of a multi-billion dollar publicly traded company than you would for buying a house?” Porritt replied. “Is that your testimony?”

Musk was also cross-examined by his own lawyer, Alex Spiro, who attempted to portray his client as a scruffy immigrant who pulled himself up to become one of the most successful businessmen in the world. But much of that story may be lost on the jury, as Musk seemed uninterested in answering questions about his childhood.

“Not good,” Musk replied when asked about his upbringing, but declined to elaborate.

But when it came to grandiose statements about his own business acumen, Musk was unreserved. “I’ve done quite a few things that were unprecedented,” he said, responding to a question from Spiro about characterizing his plan to delist Tesla as “unprecedented.”

“I think I’ve raised more money at this point by a significant margin than anyone else in history,” Musk boasted, claiming he’s never lost money from his investors. The plaintiffs cannot agree.

Leave a Comment