The Tesla Inc. trial is underway in San Francisco federal court as investors are alleging that CEO Elon Musk’s 2018 tweets about a bid to take the electric car company private were fraudulent. The two independent directors of Tesla, James Murdoch and Ira Ehrenpreis, testified on Wednesday that the board had no obligation to review Musk’s tweets before he sent them as he did so in his individual capacity.
The trial is examining whether Elon Musk can be held liable for his tweets which went against US Securities and Exchange Commission rules about corporate disclosures. The two directors are named as defendants in the lawsuit and their attorneys, who also represent Musk and Tesla, have asked the judge to dismiss allegations against them.
James Murdoch told the jury that the tweets were consistent with what he knew about Musk’s talks with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund. “They had great confidence in the availability of funding for such a transaction,” he said.
Last week, Elon Musk testified that “funding was absolutely not an issue” regarding the proposed buyout. However, he acknowledged that he did not have binding agreements with investors for specified amounts. This leaves the jury to decide if he misled shareholders.
Both sides will present their closing arguments on Friday, after which a jury of nine is expected to begin deliberating. The jury will decide whether Elon Musk artificially inflated Tesla’s share price by promoting the buyout and if so, by how much. The buyout deal never materialized as investors, particularly retail shareholders, expressed their desire to keep the company public.
“They did not need to be vetted by the company before Musk sent them because he had done so in his individual capacity,” said James Murdoch and Ira Ehrenpreis.