Tesla (TSLA) board members testified on Wednesday that Elon Musk’s 2018 Twitter posts about taking the electric-vehicle company private were consistent with what he related to the board about a potential take-private deal.
Outside director James Murdoch, son of film and television titan Rupert Murdoch, took the stand among other former or current board members.
The testimony is part of the class-action trial brought by company shareholders who contend they traded Tesla shares to their detriment based on the tweets. They claim Musk and directors are liable to pay billions of dollars in damages.
On Aug. 7, 2018, Musk posted to the social media site that he had “funding secured” to take Tesla private. While the deal never materialized, Musk maintains that at the time he believed — based on a series of meetings with Saudi Arabia’s Public Investment Fund (PIF) — that its authorized representative made an “unequivocal” verbal commitment to the transaction.
Murdoch, named as a defendant in the case, told the jury that on Aug. 2, 2018 — five days before Musk’s first disputed tweet — Musk emailed the board to communicate an offer to take Tesla private at $420 per share.
Murdoch characterized Musk’s email as “serious” and explained that the board immediately convened a special meeting — absent Musk as the potential bidder — to discuss the deal.
Tesla’s then-CEO Deepak Ahuja, Murdoch said, communicated to the board that Musk’s vision for the transaction would primarily include funding from Saudi Arabia’s Sovereign Wealth Fund and potentially include investments from existing Tesla shareholders who could choose to roll their public investments into private shares.
“I found that to be novel…and perhaps difficult,” Murdoch said, adding that he later hosted Musk for a get-together at his home where the two “talked about those dynamics.”
The following day on Aug. 3, 2018, Murdoch said the board met again, this time with Musk included. He testified that Musk and Ahuja expressed that funding was abundant and that a clear level of intent had been expressed by the PIF.
“Did it surprise you that Musk expressed confidence in funding via the Saudi PIF?” Musk’s lawyer asked Murdoch, based on his own financial dealings with Middle Eastern investment funds.
“No,” Murdoch replied.
Former Tesla director Linda Johnson Rice, also named as a defendant in the lawsuit, told the jurors that she, too, recalled Ahuja’s presentation to the board concerning the PIF’s interest in taking Tesla private.
“My understanding was Musk had discussed this transaction with the PIF,” Johnson Rice said about the Aug. 2 meeting, “and they were interested and very sincere in wanting to fund the transaction.”
Current Tesla director Ira Ehrenpreis testified that during the Aug. 2 and Aug. 3 meetings, Ahuja and Musk respectively told the board that the PIF alone could fund the entire transaction and that Musk’s tweets were consistent with his email to the board. Regardless of Saudi funding, however, Ehernpries added that Musk had “more than enough interest” from investors and that the PIF was not likely Musk’s only avenue to privatize Tesla.
Ehernpreis admitted on cross examination that he was not aware of any commitment for particular financing, or for a price for funding that would be needed to take Tesla private at the time of Musk’s posts.
Musk’s brother, an outside Tesla director, also named in the lawsuit, testified that he purposely didn’t attend the board’s initial meeting due to his family relationship creating a conflict of interest. On cross examination, he admitted that he asked his brother to be more thoughtful in his use of Twitter.
Other Tesla directors named in the lawsuit include former board members Brad Buss and Antonio Gracias, and current member Robyn Denholm.
The shareholders are tasked with proving that, at the time of the tweets, Musk knew the information within them was false and material — information that a reasonable investor would rely on in making investment decisions. They must also prove that the information caused them to buy or sell Tesla shares to their detriment.
Before trial, Senior District Court Judge Edward Chen, who is presiding over the case, ruled that Musk’s funding statement was untrue.
The defense on Wednesday rested its case. Closing arguments are slated for Friday, after which the case’s nine-member jury is expected to begin deliberations.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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Read More:Tesla board directors testify Elon Musk’s 2018 ‘funding secured’ tweet consistent with deal talks