© Reuters. FILE PHOTO: Tesla CEO Elon Musk and his security team leave the company’s local office in Washington, U.S., January 27, 2023. REUTERS/Jonathan Ernst/File Photo
By Jody Godoy and Hyunjoo Jin
SAN FRANCISCO (Reuters) – A U.S. jury found on Friday that Tesla (NASDAQ:) Inc. CEO Elon Musk and his company were not responsible for misleading investors when Musk tweeted in 2018 that he had “secured funds” to privatize the electric car company.
The plaintiffs sought billions in damages, and the decision was also seen as important to Musk himself, who often uses Twitter to express his views.
The jury returned with a unanimous verdict approximately two hours after deliberations began.
Musk was not present in court when the verdict was read, but he soon tweeted that he was “deeply grateful” for the jury’s decision.
“Thank God, the wisdom of the people has prevailed,” he said.
Nicholas Porritt, a lawyer for the investors, said in a statement: “We are disappointed with the verdict and are considering the next steps.”
Tesla shares rose 1.6% in after-hours trading following the verdict.
“A dark chapter has closed for Musk and Tesla,” Wedbush analyst Dan Ives said. Ives added that some Tesla investors feared Musk would have to sell more Tesla shares if he lost.
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 had previously said the investor case was strong, called the result “stunning.”
US securities fraud law “has always been thought of as this great bulwark against misstatements and falsehoods,” he said. “This result makes one wonder if he is 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 raised concerns that running the social media company has taken too much focus away from it.
‘BAD CHOICE OF WORDS’
Tesla shareholders claimed Musk misled them when he tweeted on August 7, 2018, that he was considering taking the company private at $420 per share, a premium of about 23% from the previous day’s close, and had “funds secured.” .
They say Musk lied when he tweeted later that day that “investor support confirmed.”
The share price soared after the tweets and then fell again after August 17, 2018, when it became clear that the buyout would not take place.
Porritt, during closing arguments, said the billionaire CEO is not above the law and should be held accountable for the tweets.
“Ultimately, this case is about whether the rules that apply to everyone else should also apply to Elon Musk,” he said.
Musk’s lawyer, Alex Spiro, responded that Musk’s “funding secured” tweet was “technically inaccurate” but that investors only cared that Musk was considering a purchase.
“The whole case rests on a poor choice of words,” he said. “Who cares about the poor choice of words?”
“Just because it’s a bad tweet doesn’t make it a fraud,” Spiro said during closing arguments.
An economist hired by the shareholders had estimated investor losses of up to $12 billion.
During the three-week trial, Musk spent nearly nine hours on the witness stand, telling the jury that he believed the tweets were true. He said he had lined up the necessary financing, including a verbal commitment from Saudi Arabia’s sovereign wealth fund, the Public Investment Fund. The fund later backtracked on its commitment, Musk said.
Musk later testified that he believed he could have sold enough shares of his rocket company SpaceX to finance a purchase, and “felt the funding was secured” with SpaceX shares alone.
Musk testified that he made the tweets to put small shareholders on an equal footing with large investors who knew about the deal. But he acknowledged that he lacked formal commitments from the Saudi fund and other potential backers.
The verdict is another victory for Musk and his lawyer Spiro after they won a defamation suit against the billionaire in 2019 for his tweet calling a cave explorer a “fart.”
