Elon Musk has defeated a shareholder lawsuit alleging that tweets claiming he had “guaranteed funds” to take private Tesla investors billions of dollars in losses.
The verdict was handed down Friday in San Francisco federal court after a three-week trial, with a victory for the billionaire chief executive of the electric vehicle maker.
The nine-person jury took just two hours to reach a unanimous verdict, justifying Musk’s decision to take the case to trial rather than settle it.
“Alhamdulillah, people’s wisdom has won!” Musk wrote on Twitter after the verdict. “I deeply respect the jury’s finding of not guilty in the private Tesla 420 case.”
Outside the courtroom, Musk’s lawyer Alex Spiro said: “The jury got it right.”
Representing “thousands” of Tesla investors in the class action suit, lead attorney Nicholas Porritt has framed the case as a test of important rules and regulations for financial markets and society more broadly, in closing arguments on Friday.
“The rules that apply to everyone else should apply to Elon Musk,” Porritt said. “Elon Musk published false tweets, with no regard for the truth, and those tweets caused investors harm. Lots of harm.”
He concluded: “All corporate America is watching.”
After the verdict, Porritt told reporters: “Securities fraud cases are difficult, difficult to prove . . . This is not the kind of behavior you would expect from a CEO of a public company.
Speaking to the plaintiffs’ lawyers after the verdict, as allowed in the US court system, one of the jurors said the case was “disorganized” and that the affected investors who testified during the trial were “ineffective”.
Another said the case “is sometimes hard to understand in layman’s terms. I don’t know stocks. I don’t invest in options.
The case centered on Musk’s tweet on August 7, 2018, which stated that he was considering taking Tesla private for $420 per share and raising funds to do so. It sent stocks into a spin, with the Nasdaq temporarily halting trading in the electric vehicle company due to volatility.
During the trial, and again during the plaintiffs’ closing arguments on Friday, jurors were shown a chart detailing the jump in Tesla’s stock price following the controversial tweets. Shares jumped to $379.57 on the day of Musk’s tweet, and then fell to $305.50 when it became clear the go-private move was not going to happen.
While Musk has held discussions with Saudi Arabian investors to take the company private, no deal has materialized. But Spiro said that Musk has not been misrepresented in having financing, and raising the necessary money “is not a problem”, because Musk’s shares in the company SpaceX can be used to cover the shortfall if necessary.
Although Musk was serious about taking Tesla private, and could raise enough funds to do so, the company did not go private because “shareholders want to remain public,” Spiro told the jury.
“That’s the motive — to do what’s right for our shareholders,” Spiro continued.
“Ultimately, whatever you think, this is not a ‘bad tweeter’ trial,” he said. “This is a trial of ‘did this person commit fraud’.”
Earlier in the trial Spiro said the “safe fund” tweets were a “split-second decision” from Musk in response to an article the Financial Times was preparing to publish about Saudi Arabia’s Public Investment Fund building a $2bn stake in Tesla. Musk said he was concerned the go-private talks would leak.
At issue is whether the conduct caused material harm by misrepresenting the company’s position in a way that would cause a “reasonable investor” to buy or sell Tesla stock. “When Elon tweets about Tesla, people listen,” Porritt said.
Jurors heard earlier in the trial from Glen Littleton, the lead plaintiff, who interpreted the tweet to mean that Tesla was going to be private “completely certain in his mind”.
Another investor, Tim Fries, bought Tesla shares at $380 in the belief that the company would go private at $420, as Musk suggested in a tweet. “I lost money,” Fries told jurors, saying Musk’s tweets “gave me confidence” that the investment was a good one.
This is the second time Musk has been found not liable in civil court over posts on Twitter, the social media platform he now owns. In 2019, a Los Angeles jury cleared him of defamation charges over a tweet that called a British diver a “pedo”.
However, the “safe fund” tweet has proven costly in other ways. He and Tesla each paid $20 million to settle legal actions from the Securities and Exchange Commission. Musk also had to step down as the automaker, though he remains chief executive.