Alex Spiro, attorney for Elon Musk, center, leaves court in San Francisco, California, USA, Tuesday, January 17, 2023.
Benjamin Fanjoy Bloomberg Getty Images
Tesla CEO Elon Musk appeared in San Francisco federal court on Friday to defend a tweet he sent to tens of millions of followers in August 2018.
The tweets said they had “guaranteed funding” to acquire the privately held electric vehicle company for $420 per share, and that “investor support” for the deal was “confirmed.”
Tesla stock trading was initially halted after the tweets, and then the stock was highly volatile for several weeks. Musk then said that he had been in discussions with Saudi Arabia’s sovereign wealth fund and was confident that the financing would be done at the proposed price. A deal never materialized.
The SEC charged Musk and Tesla with civil securities fraud after the tweets. Musk and Tesla each paid a $20 million fine to the agency, and entered into a revised settlement agreement that required Musk to relinquish his role as chairman of the board at Tesla.
His 2018 tweets also sparked a shareholder class action lawsuit from Tesla investors. He said Musk’s tweets misled him and said he relied on his claims to make trades that made him a lot of money.
The shareholder trading in question occurred over a 10-day period before Musk appeared to admit that a private deal would not happen in 2018.
Musk said he vowed on Friday that it would be difficult to link Tesla’s stock price to his tweets.
“There have been many instances where I thought if I wanted to tweet, the stock price would go down,” Musk said. “For example, at one point I tweeted that I thought that, in my opinion, the stock price was too high … and it became higher, which, which, you know, is counterintuitive.”
Huge increase in trading volume after he tweeted
It is rare for top executives of publicly traded companies to discuss stock prices because any comments can affect price movements.
Daniel Taylor, director of the Wharton Forensics Analytics Lab and professor at the University of Pennsylvania, analyzed every Tesla stock trade that occurred on August 7, 2018, the day Musk tweeted. They calculated the total trading volume per minute from the time the market opened through the time Musk tweeted about the buyout.
Taylor found that the trading volume the minute Musk tweeted, at 12:48 pm ET that day, was over $350 million, and the trading volume for Tesla shares the next minute was over $250 million. By comparison, the average volume five minutes before Musk tweeted was $32 million per minute. Minutes before Musk tweeted, trading volume was $24 million.
“It’s generally true that correlation is not causation,” Taylor told CNBC on Friday, after Musk’s first day on the witness stand. “However, I am not aware of an alternative explanation for the 10-fold increase in trading volume in the same minute as Elon Musk’s tweet.”
Musk also testified about his low opinion of short sellers on Friday.
“I believe short selling should be made illegal,” Musk said, referring to short sellers as “bad guys on Wall Street” who “steal” from other investors. He said he also planted stories in the media to “get the stock down” and would “do anything to make the company die.”
Tesla was one of the most shorted stocks in August 2018, when Musk made a statement about taking Tesla private. Tesla’s stock price rose about 10% during the day’s trading. Short sellers face huge losses when stocks in certain companies rise higher.
Some of the plaintiffs in the ongoing trial claim that Musk’s “safe-fund” tweets were intended to increase price pressure on Tesla stock, driving a so-called “short squeeze.”
Musk’s testimony has not been completed and the court plans to hear it again on Monday.
WATCH: Musk testified via tweets
