Tesla’s Elon Musk found not liable in trial over 2018 ‘funding secured’ tweets
SAN FRANCISCO, Feb 3 (Reuters) – A U.S. jury found on Friday that Tesla Inc Chief Executive Elon Musk and his company were not responsible for misleading investors when Musk tweeted in 2018 that he had “secured financing” to take the electric car company private.
The plaintiffs had asked for billions in damages and the decision was also considered important for Musk himself, who often goes on Twitter to broadcast his opinions.
The jury came back with a unanimous verdict roughly two hours after it began deliberations.
Musk was not present in court when the verdict was read but quickly tweeted that he was “very appreciative” of the jury’s decision.
“Thank goodness, the wisdom of the people won,” he said.
Nicholas Porritt, a lawyer for the investors, said in a statement, “We are disappointed with the verdict and are considering our next steps.”
Tesla shares rose 1.6% in after-hours trading following the verdict.
“A dark chapter is now closed for Musk and Tesla,” Wedbush analyst Dan Ives said. Ives added that some Tesla investors feared that Musk might have to sell more Tesla stock if he loses.
The world’s second-richest person has previously created legal and regulatory headaches through his sometimes impulsive use of Twitter, the social media company he bought for $44 billion in October.
Minor Myers, who teaches corporate law at the University of Connecticut and who previously called the investors’ case strong, called the result “amazing.”
US securities fraud law “was always meant to be this great bulwark against misrepresentations and falsehoods,” he said. “This result makes you wonder if it’s up to the job in modern markets,” he said, adding that Musk himself is likely to “double down” on his communication tactics after the verdict.
Musk’s attention has been divided in recent months between Tesla, his rocket company SpaceX and now Twitter. Tesla investors have expressed concern that the company’s leadership of social media has taken too much of its focus.
Tesla shareholders claimed that Musk misled them when he tweeted on August 7, 2018, that he was considering taking the company private for $420 per share, a premium of about 23% to the close of the a day before, and had “secured financing.”
They say Musk lied when he tweeted later that day that “investor support is confirmed.”
The stock price rose after the tweets and then fell again after August 17, 2018, as it became clear that the purchase was not going to happen.
Porritt during the closing arguments said that the billionaire CEO is not above the law, and should be held responsible for the tweets.
“This case is ultimately about whether the rules that apply to everyone should also apply to Elon Musk,” he said.
Musk’s lawyer, Alex Spiro, countered that Musk’s “guaranteed funding” tweet was “technically inaccurate” but that investors only cared that Musk was considering a buyout.
“The whole case is built on a bad word choice,” he said. “Who cares about the wrong word choice?”
“Just because it’s a bad tweet doesn’t make it fraud,” Spiro said during closing arguments.
An economist hired by the shareholders had calculated losses from investors as high as $12 billion.
During the three-week trial, Musk spent nearly nine hours on the witness stand, telling jurors he believed the tweets were true. He said he had lined up the necessary funding, including a verbal commitment from Saudi Arabia’s sovereign wealth fund, the Public Investment Fund. The fund later fulfilled its commitment, Musk said.
Musk later testified that he believed he could have sold enough shares of his rocket company SpaceX to finance a buyout, and “felt the financing was secured” with SpaceX stock alone.
Musk testified that he made the tweets in order to put the small shareholders on the same level as large investors who knew about the deal. But he acknowledged that he had no formal commitments from the Saudi fund and other potential backers.
He said his tweets in general have not always affected Tesla stock as much as he expected.
“Just because I tweet something doesn’t mean people will believe it or act accordingly,” Musk told the jury. (Reporting by Jody Godoy in California, Hyun Joo Jin in San Francisco, and Nivedita Balu in Bengaluru Editing by Noeleen Walder, Peter Henderson and Matthew Lewis)