Elon Musk claims that ‘funding was secured’ in infamous Tesla ‘420 take private’ attempt, but SEC/banks forced him to settle
Elon Musk opened up in a new interview yesterday about the SEC lawsuit regarding his attempt to take Tesla private back in 2018 and his infamous “funding secured” announcement.
The Tesla CEO now claims funding was indeed secured and that he was forced to settle with the SEC because the company’s banks were telling him that he wouldn’t be able to secure additional funding if he kept fighting the lawsuit.
The whole situation stems from the SEC filing a lawsuit against Musk over his infamous “funding secured” comment regarding his failed attempt to take Tesla private back in 2018.
Back in 2018, Musk briefly considered trying to bring Tesla private and disclosed that to investors through a simple tweet.
The Security and Exchange Commission (SEC) judged that Musk exaggerated and misled shareholders when saying that the funding was “secured” in the tweet:
Musk went on a campaign against the SEC, calling them names and claiming that they were working for people shorting the electric automaker. But ultimately, Tesla and Musk ended up reaching a settlement with the SEC.
As part of the settlement, Musk agreed to step down from the role of chairman of the board, and Tesla and Musk had to each pay $20 million in fines.
The CEO presumably didn’t want Tesla to have to pay for his issue with the SEC. While he couldn’t directly pay for Tesla’s part of the fine, he decided to buy $20 million worth of shares from Tesla. That way, he sort of indirectly ended up paying for Tesla’s fine – though he also ended up with ~71,000 additional Tesla shares in the process.
As we previously reported, Musk ended up actually making money from the settlement due to Tesla’s stock price surging.
Another part of the settlement was that Musk and Tesla had to agree for the former to have his tweets reviewed by the latter’s legal department if they are material to the company. Despite the settlement, Musk didn’t change his use of his popular Twitter account with over 80 million followers, and he has remained defiant when it comes to the SEC.
Even though this happened four years ago, it is coming back to light because Musk has been trying to get the settlement changed as he believes that the SEC has abused the Twitter policing part of the settlement.
In February, Alex Spiro, a lawyer for Musk, sent a letter to the court to request an audience to discuss what he described as the SEC’s “harassment” of Tesla and Musk. He also claims that the SEC has yet to distribute the $40 million settlement money to shareholders.
The SEC quickly denied the allegations of harassment and claimed that a plan for distributing the money was going to be submitted to the court next month and the delay is due to the complexity.
The court ended up denying Musk’s request, but his lawyers later filed a new motion in court to recant the settlement and remove the SEC’s Twitter policing of Musk.
In the motion, Musk argued through his lawyers that he never lied to Tesla shareholders and he decided to take the settlement for “Tesla’s immediate survival” as he was being told that the ongoing battle with the SEC could prevent Tesla from raising money and that Tesla’s biggest shareholders could walk away.
However, in the filing, they don’t go into details about how the funding was indeed secured. This seems material to both the SEC and the public at large, especially in light of his recent attempt at a hostile takeover of Twitter.
Now in a new interview yesterday, Musk elaborated on the situation again insisting that he never lied to investors and that “funding was indeed secured”:
Funding was indeed secured. I should say I do not have respect for the SEC in that situation. I don’t mean to blame everyone at the SEC, but certainly the San Francisco office. The SEC knew that funding was secured. They pursued an active public investigation, nonetheless.
Again, I didn’t go into details about how the funding was secured. Back then, they were rumors of potential talks about saudi arabia and volkswagen potentially being part of the deal, but those were never confirmed to be more than very early talks.
But in the new interview, Musk also insists that the SEC knew that the funding was “secured” and that Tesla was getting pressured by its banking partners to settle. He described the situation as “like having a gun to your child’s head” and the SEC “unlawfully” pressured the deal.
The SEC has yet to respond to the new comments.
These new revelations come as Musk is trying to take another public company private: Twitter. However, his financial situation has improved greatly over the last four years, and he could easily secured the money to fulfill his $41 billion offer. Though he might potentially have to sell some more Tesla shares.
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