Jury rules Musk’s tweets didn’t cause Tesla investors’ losses
A jury decided Friday that Elon Musk was not liable for losses suffered by investors after he posted messages on Twitter that he had secured the funding to take Tesla private in 2018.
Investors had sued Musk, Tesla and the company’s board, arguing that Musk’s statements about his embryonic plan to take the electric car company private had devastating financial consequences for them. But in a federal civil trial over the last three weeks, lawyers for Tesla and Musk, the car company’s CEO, have argued that he was such a successful business person that he could have easily obtained financing to take Tesla private.
Two posts on Twitter by Musk are at the heart of the case. On Aug. 7, 2018, he wrote on Twitter: “Am considering taking Tesla private at $420. Funding secured.” He then wrote: “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.” Tesla’s share price jumped after those posts and then tumbled after the proposal fell apart in less than three weeks.
The federal judge in the case, Edward M. Chen, had already ruled that “funding secured” and Musk’s second statement were untrue, and that Musk was reckless when posting them.
The jurors — seven men and two women — deliberated for about an hour, finding that Musk’s statements did not cause the investors’ losses. The verdict allows Musk to claim vindication for a dark period in his professional life when Tesla was struggling to increase production of its most affordable car, the Model 3.
If he had lost, Musk and Tesla might have had to pay billions of dollars in damages.
“The jury got it right,” Alex Spiro, a lawyer for Musk and Tesla, said after the verdict was read. “That’s all I’m going to say.”
Throughout the trial, the investors’ lawyers had argued that Musk knew Tesla was nowhere near going private because no individuals and investment funds had committed specific amounts of money to the deal. There was also neither a definitive structure for a private Tesla nor a clear path to regulatory approval for the plan, the lawyers said.
“This case is about whether rules that apply to everybody else should apply to Elon Musk,” Nicholas Porritt, a lawyer for the investors, said during closing arguments. He added that the stock market “only works because there are rules that keep people honest, so people can trust information in the market.”
The legal team for Musk and Tesla had argued that the company’s share price may have moved because Musk said he was considering taking Tesla private, a statement that they say was true. They have also argued that funding was actually plentiful but that Musk didn’t have exact numbers because he didn’t know how many shareholders would want to continue owning shares in Tesla once it was no longer on the stock exchange.
“Funding was not an issue,” Spiro said. He added that the deal had collapsed because “his motive was to do right for the shareholders.”
The case concluded less than four months after Musk acquired Twitter, whose headquarters are a half-mile from the federal court in San Francisco.
In 2018, Musk and Tesla settled a separate lawsuit with the Securities and Exchange Commission about his plan to take Tesla private. They paid $40 million in fines to the SEC, and Musk agreed to resign as Tesla’s chair and to allow a lawyer to review some statements about Tesla before posting them on social media. Musk is currently trying to terminate parts of that agreement in the U.S. Court of Appeals for the 2nd Circuit.