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Elon Musk Defiantly Defends Himself in Tesla Shareholder Trial Over ‘Funding Secured’ Tweet

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Elon Musk spent roughly three more hours on the stand during his third day of testimony before being excused by US District Judge Edward Chen.
By Associated Press | Updated: 25 January 2023

Elon Musk returned to federal court to defend himself against a class-action lawsuit that alleges he misled Tesla shareholders with a tweet about an aborted buyout that the billionaire defiantly insisted Tuesday he could have pulled off, had he wanted.

Musk spent roughly three more hours on the stand during his third day of testimony before being excused by US District Judge Edward Chen. It’s unlikely Musk, 51, will be summoned back to the witness stand during a civil trial expected to be turned over to a nine-person jury in early February.

Musk, who also owns Twitter while continuing to run Tesla, spent much of Tuesday depicting himself, while being questioned by his own attorney, Alex Spiro, as an impeccably trustworthy business leader capable of raising as much money as he needs to pursue his visions. He testily sparred with a shareholder lawyer, Nicholas Porritt, who had raised his ire earlier in the trial.

At two separate junctures Tuesday under Spiro’s gentle prodding, Musk left no doubt about his contempt for Porritt with a remark expressing doubt that the lawyer was looking out for the best interests of Tesla shareholders. The remarks drew a quick rebuke from the judge and were stricken from the record. “It’s inappropriate,” Chen at one point admonished Musk.

When he was being challenged by Porritt, Musk purposefully diverted his gaze from the lawyer and delivered his explanations while looking directly at the jurors sitting a few feet to his right. In another instance, Musk asserted, without elaborating, that a question from Porritt wondering if he had ever caused investors to suffer losses contained “falsehoods.”

On the flip side, Spiro at one point mistakenly addressed Musk as “your honor” while asking the billionaire how much money he had made for investors during his career. The slipup elicited a moment of levity in the San Francisco courtroom filled with media and other spectators in attendance to listen to Musk, who has become even more famous since completing his $44 billion (roughly Rs. 3,37,465 crore) purchase of Twitter in October.

The current trial hinges on whether a pair of tweets Musk posted on August 7, 2018, damaged Tesla shareholders during a 10-day period leading up to his admission that the buyout he had envisioned wasn’t going to happen. The statements resulted in Musk and Tesla to reach the $40 million (roughly Rs. 326 crore) settlement without acknowledging any wrongdoing.

In the first of the 2018 tweets, Musk stated “funding secured” for what would have been a $72 billion (roughly Rs. 5,86,900 crore) — or $420 (roughly Rs. 34,200) per share — buyout of Tesla at a time when the electric automaker was still grappling with production problems and was worth far less than it is now. Musk followed up a few hours later with another tweet suggesting a deal was imminent.

After those tweets, Musk declared Tesla would remain publicly a few weeks later. A month after that, Musk and Tesla reached a $40 million settlement with securities regulators who had alleged the tweets were misleading.

Musk has previously contended he entered into the settlement under duress and maintained he never wavered in his belief that he had the money for a deal.

Musk spent most of Tuesday trying to persuade the jurors that there was nothing devious about the two tweets indicating he had lined up the money to take Tesla private as the electric automaker was struggling with production problems and was worth far less than it is now. The judge has already declared the jurors can consider those two tweets to be false, leaving them to decide whether Musk deliberately deceived investors and whether his statements saddled them with losses.

While being steered by Spiro, Musk told jurors he had stated only that he was “considering” a Tesla buyout but never promised a deal would get done. But, Musk said, he thought it important to get the word out to investors that Tesla might be poised to end its eight-year run as a publicly held company.

“I had no ill motive,” Musk said. “My intent was to do the right thing for all shareholders.”

While being grilled the day before by Porritt, Musk at times was combative, indignant and exasperated. Through it all, Musk has insisted he locked up financial backing for what would have been a $72 billion buyout of Tesla during 2018 meetings with representatives from Saudi Arabia’s Public Investment Fund, although no specific funding amount or price was discussed.

When presented with texts and email indicating that a representative for the Saudi fund had never pledged the money for a full buyout of Tesla, Musk contended it was nothing more than the words of someone trying to backpedal from a previous pledge made in private conversations.

Not long after Porritt resumed his questioning Tuesday, Musk once again scoffed at the notion that his belief that he had the Saudi funding’s financial backing wasn’t enough for him to tweet about a potential Tesla buyout.

“We are talking about the kingdom of Saudi Arabia,” Musk testified. “They can buy Tesla several times over. This was not a large amount of money for them.”

Musk also reiterated earlier testimony that he could finance a Tesla buyout by sharing some of his holdings in SpaceX, a privately held maker of rocket ships that he also started. That would be similar to what he did in the Twitter purchase, which led him to sell about $23 billion of his Tesla stock.

That’s something that Musk said Tuesday that he didn’t want to do, but that it showed he had the wherewithal to pull together purchases for expensive deals. Musk’s ownership of Twitter also has proved unpopular with Tesla shareholders who worry about him being distracted as the automaker faces more competition. Tesla’s stock has lost about one-third of its value since Musk took over Twitter.

Despite that downturn, the stock is still worth about seven times more than at the time of Musk’s 2018 tweets, after adjusting for two splits that have since occurred. That opened the door for Musk to remind jurors Tuesday that any investor who held Tesla shares in August 2018 would have done “extremely well,” had they just held on to the stock.

“It would have been the best investment in the stock market,” Musk said.

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Facebook Asks UK Tribunal to Block $3.7 Billion Mass Action Lawsuit Over Market Dominance

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The lawsuit claims users should get compensation for the economic value they would have received if Facebook was not in a dominant market position.
By Reuters | Updated: 31 January 2023

Facebook on Monday asked a London tribunal to block a collective lawsuit valued at up to GBP 3 billion (roughly Rs. 30,300 crore) over allegations the social media giant abused its dominant position to monetise users’ personal data.

Meta, the parent company of the Facebook group, is facing a mass action brought on behalf of around 45 million Facebook users in Britain.

Legal academic Liza Lovdahl Gormsen, who is bringing the case, said Facebook users were not properly compensated for the value of personal data that they had to provide to use the platform.

Her lawyers said users should get compensation for the economic value they would have received if Facebook was not in a dominant position in the market for social networks.

But Meta said the lawsuit was “entirely without merit” and should not be allowed to proceed. Its lawyers said the claimed losses ignore the “economic value” Facebook provides.

Lovdahl Gormsen’s lawyers on Monday asked the Competition Appeal Tribunal to certify the case under the UK’s collective proceedings regime – which is roughly equivalent to the class action regime in the United States.

A decision to certify collective proceedings will depend on whether the tribunal decides that the individual cases can appropriately be dealt with together, rather than on their merits.

Ronit Kreisberger, representing Lovdahl Gormsen, told the tribunal that “Meta’s data practices violate the prohibition on abusive conduct by dominant firms”.

“There is unquestionably a case for Meta to answer at trial,” Kreisberger argued.

But lawyers representing Meta said the lawsuit wrongly assumes that any “excess profits” it might make equates to a financial loss suffered by individual Facebook users.

This approach “takes no account whatsoever of the significant economic value of the service provided by Facebook”, Marie Demetriou said in court documents.

She said Lovdahl Gormsen’s estimate of potential claimants’ total losses – GBP 3 billion, including interest – is “at the very least wildly inflated”.

© Thomson Reuters 2023

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Twitter Working to Introduce Payments Feature Amid Drop in Advertising Income: Report

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Elon Musk had previously said that the Twitter acquisition would be part of a master plan to create "the everything app".
By Reuters | Updated: 31 January 2023

Twitter is working to introduce payments on the social media platform and has begun applying for regulatory licenses, the Financial Times reported on Monday, citing people familiar with the matter.

New boss Elon Musk is pushing Twitter to create new streams of revenue as it faces a drop in advertising income, following his $44 billion (roughly Rs. 3.6 lakh crore) takeover of the company in October.

The development of the payments feature is being led by Esther Crawford, a director of product management at Twitter, according to the report, which added that the executive was emerging to be a key lieutenant to Musk.

Twitter did not immediately respond to a Reuters request for comment.

Musk had previously said that the Twitter acquisition would be part of a master plan to create “the everything app”, a service that would offer social networking, peer-to-peer payments and e-commerce shopping.

Prior to Musk’s takeover, Twitter in early 2021 was exploring allowing its users to receive tips, or digital payments, from their followers.

Meanwhile, Twitter announced last week that users will be able to appeal account suspensions and be evaluated under the social media platform’s new criteria for reinstatement, starting February 1.

Under the new criteria, which follow billionaire Elon Musk’s purchase of the company in October, Twitter accounts will only be suspended for severe or ongoing and repeat violations of the platform’s policies.

Severe policy violations include engaging in illegal content or activity, inciting or threatening violence or harm, and engaging in targeted harassment of other users, among others.

Twitter said that going forward, it will take less severe action, in comparison to account suspension, such as limiting the reach of tweets that violate its policies or asking users to remove tweets before continuing to use the account.

© Thomson Reuters 2023

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Cryptocurrency

Sam Bankman-Fried’s Bail Guarantors Should be Named, US Judge Rules

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Sam Bankman-Fried's Bail Guarantors Should be Named, US Judge Rules
By Reuters | Updated: 31 January 2023

A US judge on Monday said the names of two people who helped guarantee bail for indicted FTX cryptocurrency exchange founder Sam Bankman-Fried should be made public, but put his ruling on hold pending an expected appeal.

US District Judge Lewis Kaplan in Manhattan ruled in favour of several media outlets including Reuters that sought the names.

The judge said that while the public had only a “weak” right to know who Bankman-Fried’s guarantors were, it outweighed Bankman-Fried’s arguments for confidentiality, including that the guarantors’ safety could be imperilled.

Kaplan also said the names will remain under seal until at least February 7, because “the question presented here is novel and an appeal is likely.” A spokesman for Mark Cohen and Christian Everdell, who represent Bankman-Fried, declined to comment. Bankman-Fried, 30, has been confined at his parents’ home in California, after pleading not guilty to fraud for allegedly looting billions of FTX customer dollars.

His parents, both professors at Stanford Law School, had co-signed a $250 million (roughly Rs. 2,041 crore) bond for their son, with two other guarantors required to sign $500,000 (roughly Rs. 4 crore) and $200,000 (roughly Rs. 1.6 crore) bonds.

Bankman-Fried’s lawyers said the parents had been harassed and received physical threats since FTX’s November collapse and bankruptcy, and there was “serious cause for concern” the additional guarantors might suffer similar treatment.

Kaplan disagreed, noting that long before bail was posted, the parents had faced “intense public scrutiny” over their relationship with their son, who was once worth an estimated $26 billion (roughly Rs. 2 lakh crore).

“The amounts of the individual bonds — $500,000 and $200,000 — do not suggest that the non-parental sureties are persons of great wealth or likely to attract the attention of the types and volume of that to which defendant’s parents appear to have been subjected,” Kaplan wrote.

Media outlets distinguished the case from another judge’s decision not to reveal who guaranteed a bond for Jeffrey Epstein’s longtime associate Ghislaine Maxwell.

They said there was less “stigma” from being associated with Bankman-Fried than from being associated with the late sex offender. Maxwell was later convicted.

Other media seeking to identify Bankman-Fried’s guarantors included the Associated Press, Bloomberg, CNBC, CoinDesk, Dow Jones, the Financial Times, Insider, the New York Times and the Washington Post.

© Thomson Reuters 2023

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US Said to Stop Granting Export Licences for 4G, AI, Wi-Fi, Cloud Technology for China’s Huawei: All Details

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US officials are said to be creating a new formal policy of denial for shipping items to Huawei that would include items below the 5G level.
By Reuters | Updated: 31 January 2023 10:03 IST

The Biden administration has stopped approving licenses for US companies to export most items to China’s Huawei, according to three people familiar with the matter.

Huawei has faced US export restrictions around items for 5G and other technologies for several years, but officials in the US Department of Commerce have granted licenses for some American firms to sell certain goods and technologies to the company. Qualcomm, in 2020, received permission to sell 4G smartphone chips to Huawei.

A Commerce Department spokesperson said officials “continually assess our policies and regulations” but do not comment on talks with specific companies. Huawei and Qualcomm declined to comment. Bloomberg and the Financial Times earlier reported the move.

One person familiar with the matter said US officials are creating a new formal policy of denial for shipping items to Huawei that would include items below the 5G level, including 4G items, Wi-Fi 6 and 7, artificial intelligence, and high-performance computing and cloud items.

Another person said the move was expected to reflect the Biden administration’s tightening of policy on Huawei over the past year. Licenses for 4G chips that could not be used for 5G, which might have been approved earlier, were being denied, the person said. Toward the end of the Trump administration and early in the Biden administration, officials had still granted licenses for items specific to 4G applications.

American officials placed Huawei on a trade blacklist in 2019 restricting most US suppliers from shipping goods and technology to the company unless they were granted licenses. Officials continued to tighten the controls to cut off Huawei’s ability to buy or design the semiconductor chips that power most of its products.

But US officials granted licenses that allowed Huawei to receive some products. For example, suppliers to Huawei got licenses worth $61 billion (roughly Rs. 5 lakh crore) to sell to the telecoms equipment giant from April through November 2021.

In December, Huawei said its overall revenue was about $91.53 billion (roughly Rs. 7.5 lakh crore), down only slightly from 2021 when US sanctions caused its sales to fall by nearly a third.

© Thomson Reuters 2023

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Internet

Chinese Internet Giant Baidu Planning to Launch AI Chatbot Similar to OpenAI’s ChatGPT in March

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Baidu plans to debut the application by initially embedding it into its main search services.
By Reuters | Updated: 30 January 2023

Chinese Internet giant Baidu is planning to launch an artificial intelligence chatbot tool similar to OpenAI’s ChatGPT in March, a person familiar with the matter told Reuters.

Baidu plans to debut the application by initially embedding it into its main search services, Bloomberg News reported earlier.

ChatGPT’s tech works by learning from vast amounts of data how to answer any prompt by a user in a human-like way, offering the information like a search engine would or prose like an aspiring novelist.

Microsoft has a $1 billion investment in San Francisco-based OpenAI that it has looked at increasing, Reuters has reported. The company has also worked to add OpenAI’s image-generation software to its Bing search engine in a new challenge to Alphabet Inc’s Google.

Last week, the company announced a further multibillion dollar investment in OpenAI, deepening ties with the startup behind the chatbot sensation ChatGPT and setting the stage for more competition with rival Alphabet Inc’s Google.

Microsoft in a blog post announced “the third phase” of its partnership “through a multiyear, multibillion dollar investment” including additional supercomputer development and cloud-computing support for OpenAI.

Both companies will be able to commercialize the AI tech that results, the blog post said.

A Microsoft spokesperson declined to comment on the terms of the latest investment, which some media outlets earlier reported would be $10 billion (roughly Rs. 82,000 crore).

The widely anticipated investment shows how Microsoft is locked in competition with Google, the inventor of key AI research that is planning its own unveil for this spring, a person familiar with the matter previously told Reuters.

Microsoft’s bet came days after it and Alphabet each announced layoffs of 10,000 or more workers. Redmond, Washington-based Microsoft warned of a recession and growing scrutiny of digital spend by customers in its layoff announcement.

© Thomson Reuters 2023

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‘Michael Jordan of Fundraising’: Elon Musk Emerges a Money Maverick in Tesla Tweet Trial

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The trial is centred on a pair of tweets from Musk announcing he had obtained the money to take Tesla private in 2018.

By Associated Press | Updated: 30 January 2023

Elon Musk’s enigmatic personality and unconventional tactics are emerging as key exhibits in a trial revolving around one of his most polarizing pursuits — tweeting.

The trial, centred on a pair of tweets announcing Musk had obtained the money to take Tesla private in 2018, reeled the 51-year-old billionaire into a federal courtroom in San Francisco for three days of testimony that opened a peephole into his often inscrutable mind.

Musk, who now owns the Twitter service that he deploys as his megaphone, was often a study in contrasts during his roughly eight hours on the stand. The CEO of the electric carmaker is facing a class-action lawsuit filed on behalf of Tesla shareholders after Musk tweeted about a company buyout that didn’t happen.

Elon Musk’s enigmatic personality and unconventional tactics are emerging as key exhibits in a trial revolving around one of his most polarizing pursuits — tweeting.

The trial, centred on a pair of tweets announcing Musk had obtained the money to take Tesla private in 2018, reeled the 51-year-old billionaire into a federal courtroom in San Francisco for three days of testimony that opened a peephole into his often inscrutable mind.

Musk, who now owns the Twitter service that he deploys as his megaphone, was often a study in contrasts during his roughly eight hours on the stand. The CEO of the electric carmaker is facing a class-action lawsuit filed on behalf of Tesla shareholders after Musk tweeted about a company buyout that didn’t happen.

But his confidence in his ability to get the money he wants to pursue his plans is one reason he found himself in court. The three-week trial is set to resume Tuesday and head for jury deliberations by Friday.

Here’s what to know so far:

Planting the seeds

Evidence and testimony have shown Musk had started to mull taking Tesla private in 2017 so he wouldn’t have to hassle with the headaches and distractions that accompany running a publicly traded company.

After a July 31, 2018, meeting with a top representative from Saudi Arabia’s sovereign wealth fund, Musk sent a letter to Tesla’s board outlining why he wanted to take the automaker private at a price of $420 per share — about 20 percent above its stock price at the time.

Musk was serious enough that he had already discussed the pros and cons with Michael Dell, who had gone through the public-to-private transition in 2013 when he led a $25 billion buyout of the personal computer company bearing his name, according to trial evidence.

The troublesome tweets

The crux of the case hinges on an August 7, 2018, tweet in which Musk declared “funding secured” to take Tesla private. Musk abruptly posted the tweet minutes before boarding his private jet after being alerted that the Financial Times was about to publish a story that Saudi Arabia’s Public Investment Fund had spent about $2 billion buying a 5 percent stake in Tesla to diversify its interests beyond oil, according to his testimony.

Amid widespread confusion about whether Musk’s Twitter account had been hacked or he was joking, Musk followed up a few hours later with another tweet suggesting a deal was imminent.

Musk defended the initial tweet as a well-intentioned move to ensure all Tesla investors knew the automaker might be on its way to ending its then-eight-year run as a publicly held company.

“I had no ill motive,” Musk testified. “My intent was to do the right thing for all shareholders.”

Guhan Subramanian, a Harvard University business and law professor hired as an expert for shareholder lawyers, derided Musk’s method for announcing a potential buyout as an “extreme outlier” fraught with potential conflicts.

“The risk is that Mr. Musk timed his announcement of his (management buyout) proposal to serve his own interests rather then the interests of the company,” Subramanian testified.

Where’s the money?

There’s another issue threatening to undermine Musk’s defense. He hadn’t locked up the financing for his proposed deal or even pinned down down how much would be needed to pull it off, based on testimony from Musk, other witnesses and other evidence.

That is one reason U.S. District Judge Edward Chen had decided last year that Musk’s 2018 tweets were false and has instructed the jury to view them that way.

It also prompted regulators to allege Musk misled investors with the tweets, resulting in a $40 million settlement with the U.S. Securities and Exchange Commission that also required Musk to step down as Tesla’s chairman.

Chen ruled that the 2018 settlement, in which Musk didn’t acknowledge wrongdoing and has since lamented making, can’t be mentioned to the jury.

Musk testified that he believed he had secured an oral commitment to provide wherever money was needed for a Tesla buyout during a July 31, 2018, face-to-face meeting with Yasir al-Rumayyan, governor of Saudi Arabia’s wealth fund.

That was reinforced in testimony from Tesla’s former chief financial officer, Deepak Ahuja, who was at the discussions and took al-Rumayyan on a half-hour tour of a Tesla factory.

But a text message al-Rumayyan sent to Musk after the “funding secured” tweets made it appear that the discussions about the Saudi fund financing a private buyout were preliminary.

“I would like to listen to your plan Elon and what are the financial calculations to take it,” al-Rumayyan wrote to Musk, according to a copy submitted as evidence in the trial.

Musk framed al-Rumayyan’s text as an attempt to backpedal from his previous commitment. He also insisted the Saudi fund had given an “unequivocal commitment” to financing the buyout.

Money manoeuvring

After his 2018 tweets, Musk tried to get the money needed for the Tesla buyout with the help of Egon Durban, co-CEO of the private equity firm Silver Lake, which helped finance the Dell buyout in 2013. Musk also enlisted Dan Dees, a top executive with Goldman Sachs, an investment banking firm that had worked closely with Tesla.

In testimony, both Durban and Dees discussed efforts to raise money for a Tesla buyout for a wide range of potential investors that included two Chinese companies, Alibaba and Tencent, as well as Google in documents initially code-named “Project Turbo,” then “Project Titanium.”

The buyout would have required anywhere from $20 billion to $70 billion, according to the documents — funding that never came close to getting raised, Durban and Dees both testified, largely because Musk scrapped the proposal to take Tesla private on Aug. 24, 2018, after consulting with shareholders.

Tesla’s shares are now worth eight times what they were then, after adjusting for two stock splits.

Musk still contends he could have gotten the money had he wanted and, even if there was a shortfall, he could have covered any gap by selling some of his stock in privately held SpaceX. That is a strategy Musk used in his $44 billion purchase of Twitter, except he sold about $23 billion of his stock in Tesla.

Durban and Dees both testified that they had no doubt the money for a buyout could have been raised — echoed by former Tesla director Antonio Gracias.

“He is the Michael Jordan of fundraising,” Gracias testified.

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