Jury Rules for Elon Musk and Tesla in Investor Lawsuit Over Tweets
A jury decided on Friday that Elon Musk was not liable for losses suffered by investors after he posted a notice on Twitter that he had secured funding to go private. Tesla in 2018.
Investors have sued Musk, Tesla and the company’s board, arguing that Mr Musk’s claims about his embryonic plans to take the electric car company private had financial consequences serious for them. But in a federal civil trial over the past three weeks, lawyers for Tesla and Mr. Musk, the car company’s chief executive, have argued that he is such a successful businessman that he can easily raise money for business. mobilize the financial resources to privatize Tesla.
Musk’s two Twitter posts were at the heart of the incident. On August 7, 2018, he Written on Twitter: “I am considering privatizing Tesla for $420. Funding is guaranteed.” He then Written: “Investor support confirmed. The only reason this is uncertain is that it depends on shareholder votes.” Tesla’s share price spiked 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, ruled that “funding is secured” and Mr. Musk’s second statement was untrue, and that Mr. Musk was reckless in posting them.
The jurors – seven men and two women – deliberated for about an hour, finding that Mr. Musk’s claims did not harm investors. The verdict allows Mr. Musk to claim vindication of a dark period in his career when Tesla was struggling to increase production of its most affordable car, the Model 3.
If the lawsuit is lost, Musk and Tesla could have to pay billions of dollars in damages.
“The jury did the right thing,” Alex Spiro, an attorney for Musk and Tesla, said after the verdict was read. “That’s all I was going to say.”
During the trial, lawyers for the investors argued that Mr. Musk knew Tesla would not be able to go private because no individual or fund had committed a specific amount to the deal. There is also no definitive structure for a private Tesla and no clear route to regulatory approval for the plan, the lawyers said.
“This case is about whether rules that apply to others should apply to Elon Musk,” said Nicholas Porritt, an attorney for the investors. He added that the stock market “only works because there are rules to keep people honest, so that people can trust the information in the market.”
Mr. Musk and Tesla’s legal team have argued that the company’s share price may have changed because Mr. Musk has said he is considering taking Tesla private, a claim they believe to be true. They also argue that funding is indeed plentiful, but Musk doesn’t have an exact figure because he doesn’t know how many shareholders want to continue owning Tesla shares after it’s gone.
“The cost is not the issue,” Mr. Spiro said. He added that the deal fell apart because “his motive was to do the right thing for shareholders.”
The case ended less than four months after Musk acquired Twitter, whose headquarters are half a mile from the federal courthouse in San Francisco.
In 2018, Musk and Tesla settled a separate lawsuit with the Securities and Exchange Commission over his plans to take Tesla private. They paid a $40 million fine to the SEC, and Musk agreed to step down as Tesla chairman and let an attorney review some of Tesla’s claims before posting them on social media. Mr. Musk is currently trying to end parts of that agreement in the US Court of Appeals for the Second Round.