Tesla’s former chief financial officer, Deepak Ahujabacked up the claims of Tesla (TSLA) CEO Elon Musk during testimony on Wednesday in a federal shareholder class-action suit pending against Musk and Tesla directors.
The case, which says Musk and certain board members should be held liable for a stock price volatility in August 2018, alleges that Musk artificially inflated Tesla’s stock price when he tweeted that he had “funding secured” to take Tesla private.
“When you saw this tweet, did you think it was a lie, sir?” a lawyer for Musk and the directors asked during the fifth day of trial testimony.
“I did not,” Ahuja said. “This was consistent with the facts I knew, with the information I had.”
To win their case, the shareholders must prove that, at the time of the tweets, Musk knew the information within them was materially false and that the information caused them to buy or sell Tesla shares to their detriment.
Senior District Court Judge Edward Chenwho is presiding over the case, has already ruled and instructed the nine-member jury that Musk’s funding statement was untrue. Jurors are therefore tasked with deciding whether the tweets were material — those that a reasonable investor would rely on in making investment decisions — and whether Musk believed his tweets to be true or false.
Ahuja said that at the time of Musk’s “funding secured” tweet, he and Musk believed Saudi Arabia’s Public Investment Fund (PIF) was willing to fund an entire take-private transaction. Ahuja said that understanding was based on a history of meetings that he, Musk, and others at Tesla held with the PIF’s representative, Yasir Al-Rumayyan, going back to March 2017.
“My impression was that, even in the absence of any other investor, they were willing to fund the deal to go private,” Ahuja said.
Ahuja explained that Musk did not act on an earlier 2017 meeting, during which the PIF and Softbank mobile telecom giant founder, Masayoshi Son, expressed interest in investing in Tesla. Both “clearly understood” that the financial implications of their proposals would likely require investments of $30 billion to $60 billion, Ahuja said.
More than a year later, on July 31, 2018, Ahuja said Musk decided to move forward with the PIF’s privatization offer. Days later on Aug. 3, he brought the proposal to Tesla’s board. Musk’s communication to the board, Ahuja said, explained that the PIF was willing to fund the entire transaction.
“Did you believe that was a truthful statement?” Tesla’s lawyer asked.
“It was,” Ahuja responded. “The board of directors were giving due and serious attention to Elon’s proposal.”
Under questioning by the shareholders’ counsel, Ahuja admitted that when Musk emailed the board with the Tweeted $420-per-share proposal, Musk had not yet engaged with legal or financial advisors.
The shareholders’ lawyer pressed Ahuja on the fact that a specific dollar amount to take Tesla private was not discussed at the July 31, 2018 meeting. However, according to Ahuja, Al-Rumayyan said, “we are ready to act” in reference to the take-private deal.
Ahuja later said the Saudi fund had at one point indicated an understanding that a take-private transaction would require funds totaling as much as 50% of Tesla’s then-market capitalization. He said the PIF’s Al-Rumayyan indicated it would likely fund the deal alone, although it would reach out to United Arab Emirates-based funds if more capital were needed.
Ahuja admitted that the parties had not discussed potential regulatory hurdles, specifically whether US authorities would scrutinize and potentially block the PIF from owning a sizable share of Tesla, given legal limitations on foreign investment in US-based companies.
The plaintiff shareholders also questioned Ahuja about Musk’s testimony from the witness stand earlier in the week saying that his “funding secured” language included a possibility that he could sell his private stock in SpaceX to fund a take-private deal. In discussions where he was involved, Ahuja said, he had not been made aware of a proposal that would involve equity from SpaceX stock sales.
Testimony is ongoing. Judge Chen said the trial is expected to last three weeks.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.