Elon Musk Said He Has Secured Funding to Take Tesla Inc. Private

Elon Musk said he has secured funding to take Tesla Inc. private.

In 2018, Elon Musk floated the idea of taking Tesla private, saying that financing from Saudi Arabia’s sovereign-wealth fund and his own stake in rocket-company SpaceX would have provided sufficient capital.

"I felt that funding was secured with the SpaceX stock alone," Mr. Musk said during his second day on the stand in a case brought by investors. The investors allege that they lost money because of Mr. Musk's tweets proposing to take the car company private.

Mr. Musk met with representatives of Saudi Arabia’s sovereign-wealth fund in late July 2018, a week before floating the possibility of taking Tesla private. A specific price for taking Tesla private wasn’t discussed at that meeting, nor was there a signed document, Mr. Musk testified. Nevertheless, Mr. Musk said he walked away from the meeting thinking it was a “done deal.”

"The one thing that was absolutely clear was that they were completely supportive of taking Tesla private," he said.

The class-action case being tried in federal court in San Francisco is focused on Tesla chief executive's tweets from more than four years ago. In these tweets, he floated the possibility of taking the company private and the effect they had on individual investors’ decision-making. “Am considering taking Tesla private at $420. Funding secured,” Mr. Musk, then serving as both Tesla’s chairman and CEO, tweeted on Aug. 7, 2018. He later added, “Investor support is confirmed.”

An attorney for the group of investors suing Mr. Musk, Tesla, and the company's board said Mr. Musk lied about securing funding to take Tesla private. These lies, the attorney said, caused investors who relied on them to lose money.

Tesla's stock shot up 11% the day Mr. Musk tweeted about potentially taking the company private. However, it gave back those gains and then some as questions emerged about the deal. Ultimately, the deal never came to pass.

An attorney representing Mr. Musk and Tesla said last week that Mr. Musk's "funding secured" tweet was an inartful way of describing the situation at the time.

Mr. Musk pointed out the limitations of Twitter communication in court on Friday, explaining that the character limit on tweets makes it impossible to be comprehensive.

‍"I think you can be truthful on Twitter, but you can't be comprehensive," Mr. Musk told jurors.

Last week, jurors also heard from two investors who lost money after Mr. Musk's tweets. Glen Littleton, the lead plaintiff, testified that he quickly sold off some of his investments after seeing the tweets. Littleton said, "this represented a threat to my livelihood."

Timothy Fries, a member of the class who testified Friday, said he lost $5,000 after buying 50 shares of Tesla stock following Mr. Musk’s tweets. Those shares cost $370 apiece, according to an investment report. He sold those shares at a loss in early September 2018, after it became clear Tesla wouldn’t go private.

Mr. Fries said that he was aware that a deal had not been finalized when he purchased Tesla stock. However, he added that he believed the funding had been approved because the tweet said "funding secured."

U.S. District Judge Edward Chen, who is overseeing the trial, ruled last year that some of Mr. Musk’s statements about potentially taking the company private—such as “funding secured” and “investor support is confirmed”—weren’t true. Judge Chen also found that Mr. Musk acted recklessly in sending those tweets.

The jury is currently deliberating on whether or not the tweets in question were material to investors, and if the misrepresentations made in them caused investors to suffer losses. The judge has instructed jurors that any evidence they may hear regarding the circumstances surrounding the tweets should not be used to determine the truth of the statements, but could be relevant to other issues, such as whether or not Musk knew that what he was saying was false.

Mr. Musk raised questions about the link between his tweets and the market's reaction on the stand Friday. "Just because I tweet something does not mean people believe it or act accordingly," Mr. Musk said.

The trial is expected to last until early February.