Dan Dees, one of Goldman Sachs Group Inc.’s most senior executives, told a jury he was surprised in August 2018 by Elon Musk’s tweet about taking Tesla Inc. private, adding to evidence at a securities fraud trial that the car company CEO’s announcement caught even his bankers off guard.
(Bloomberg) — Dan Dees, one of Goldman Sachs Group Inc.’s most senior executives, told a jury he was surprised in August 2018 by Elon Musk’s tweet about taking Tesla Inc. private, adding to evidence at a securities fraud trial that the car company CEO’s announcement caught even his bankers off guard.
The trial, now in its second week in San Francisco federal court, revolves around Musk’s controversial August 2018 Twitter post that he was considering taking the electric-car maker private with “funding secured.”
Lawyers for the investors are aiming with testimony from Dees, who is a co-head of Goldman’s banking and markets division, and Egon Durban, the co-chief executive officer of private equity firm Silver Lake Management, to show that Musk’s tweet was premature — and constituted a violation of securities laws — because the bankers had been barely consulted and hadn’t formally signed on to his take-private plan.
“I was surprised he was taking Tesla private,” Dees said Friday. “I was surprised we weren’t involved at Goldman.”
Musk has testified the Aug. 7, 2018, tweet was “absolutely truthful,” touting what he described as an “unequivocal” commitment by Saudi Arabia’s sovereign wealth fund to back the go-private plan with billions of dollars — even though he had nothing in writing.
Before Dees took the stand, Durban recalled for the jury a conversation in which he told Musk $6 billion was the most Silver Lake could commit to the transaction — which he said would have been the second- or third-biggest funding round the firm had ever done. Jurors have previously been told the take-private plan would have cost about $60 billion.
Durban also said that in his career, he hadn’t seen a transaction with the “unique” structure Musk was proposing, in which investors in the public company would be rolled over into the private one. The timing of Musk’s tweet caught Durban by surprise, he testified, while explaining that the $420-a-share price target was anticipated because it reflected a 20% premium on Tesla’s stock price.
Read More: Musk-Tesla Tweet Fraud Accusers Say,” He Confused Jury 10 Times
“We had just spoke the night before,” the Silver Lake boss said, noting that they planned to meet later that same week. Although he said it’s “atypical” for a CEO to announce such a transaction as he’s still considering it, Durban told the jury he didn’t think financing would be an obstacle, based on his years of experience working with funders.
Lawyers for the shareholders have previously displayed for the nine-member panel an email exchange between Dees and Musk starting on the same day the Tesla CEO tweeted about taking Tesla private.
“At GS, we are standing by and ready to help,” Dees tells Musk. “We are ready to fly in and share some views and dig in to help whenever you’re ready.”
Musk responds: “Sounds good. Will call as soon as I have a spare moment.”
The email supports the investors’ argument that the formal process of taking Tesla private hadn’t even started when Musk told the investing world that he had “funding secured.”
Another witness lined up by the investors is Ryan Brinkman, an analyst at JPMorgan Chase & Co., who may be asked about his Aug. 23, 2018, report concluding that Musk’s going private “story seemed to fall apart,” causing the bank to lower Tesla’s target price from $308 to $195.
The JPMorgan report found that Musk’s plan was “much less developed” than the bank believed based on his initial tweets. JPMorgan also said it had questions about Tesla’s Aug. 13 blog post clarifying Musk’s initial tweets.
“Why would the Saudi fund be asking Mr. Musk for details on how the company would be taken private if the Saudi fund had already made a formal offer?” the report asks.
Musk has argued he felt compelled to reveal that he was considering taking Tesla private because on the Financial Times had just reported that same day that Saudi Arabia was building a sizeable stake in Tesla. On the witness stand, Musk said he was afraid his going-private plans might also be leaked, and that he wanted to put all Tesla investors on equal-footing by broadcasting his plans on Twitter.
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