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#AceNewsDesk – UPDATE – Tesla founder Elon Musk has been cleared of wrongdoing for a tweet in which he said he had “funding secured” to take the electric carmaker back into private ownership.
Shareholders argued he misled them with his posts in August 2018, and they had lost billions of dollars because of them.
The proposed $72bn (£60bn) buyout never materialised.
If found liable, Musk could have been ordered to pay out billions in damages.
It took the nine jurors less than two hours to reach their verdict on the class-action lawsuit on Friday afternoon.
Mr Musk – who had wanted the trial moved to Texas, where Tesla is based, arguing he could not get a fair trial in San Francisco – welcomed the outcome.
Taking to Twitter, the social media platform he bought for $44bn last October, he posted: “Thank goodness, the wisdom of the people has prevailed!
“I am deeply appreciative of the jury’s unanimous finding of innocence in the Tesla 420 take-private case.”
Central to the lawsuit was Mr Musk’s tweet on 7 August 2018: “Am considering taking Tesla private at $420. Funding secured.”
The plaintiffs also argued Mr Musk had lied when he tweeted later in the day that “investor support is confirmed”.
The stock price surged after the tweets, but fell back again within days as it became clear the deal would not go through.
According to an economist hired by the shareholders, investor losses were calculated as high as $12bn, after many made decisions about buying and selling their shares based on the tweet.
The US Securities and Exchange Commission (SEC) sued Mr Musk over his tweets, accusing him of lying to investors. Mr Musk agreed to step aside as Tesla board chairman and settled for $20m.
During the three-week trial, Mr Musk – who also leads SpaceX and Twitter – had argued he thought he had a verbal commitment from Saudi Arabia’s sovereign wealth fund for the deal.
During his nearly nine hours on the witness stand, the world’s second-richest man said: “Just because I tweet something does not mean people believe it or will act accordingly.”
Shareholders had argued that “funding secured” suggested more than a verbal agreement.
Just a ‘bad tweet’?
Although Tesla’s share price shot up after the tweet was posted, Mr Musk also questioned whether his tweets had any effect on Tesla’s share price.
“At one point I tweeted that I thought that, in my opinion, the stock price was too high… and it went higher, which is counterintuitive,” he said – arguing the effect his tweets have on the stock price can be unpredictable.
Mr Musk said he eventually scrapped the plan to take Tesla private after his discussions with smaller investors led him to believe they would prefer that the firm remain publicly traded.
He was not in court when the verdict was read, but he was present during closing arguments earlier on Friday as duelling portraits were drawn of him by the rival legal teams.
Nicholas Porritt, a lawyer for the Tesla shareholders, said: “Our society is based on rules. We need rules to save us from anarchy. Rules should apply to Elon Musk like everyone else.”
Mr Musk’s attorney, Alex Spiro, said:
” Just because it’s a bad tweet doesn’t make it a fraud.”
After the verdict, Mr Porritt said: “We are disappointed with the verdict and are considering next steps.”
Mr Musk was generally calm during his testimony – though at times he appeared annoyed at the line of questioning.
There were also times of levity. After a lawyer representing shareholders accidentally called Elon Musk “Mr Tweet”, Elon Musk promptly changed his name on Twitter to the same moniker.
Several Tesla directors also testified, including James Murdoch, son of Rupert Murdoch. They testified that Mr Musk did not need the Tesla board to review buyout tweets.
Securities fraud lawyer Reed Kathrein called the tweet about taking Tesla private “as concrete a statement of taking a company private as there can be”, and said the not guilty verdict was “a travesty to investors and the securities laws”
Elon Musk likely to ‘double-down’ after being found not liable in trial over 2018 ‘funding secured’ Tesla tweets
Elon Musk may become even more emboldened in his Twitter use after a jury cleared the billionaire Tesla chief executive over his missive that he had “funding secured” to take his electric car company private.
Plaintiffs had claimed billions in damages and the decision also had been seen as important for Mr Musk himself, who has aggressively defended his ability to tweet broadly.
The jury came back with a verdict roughly two hours after beginning deliberations.
The decision means Mr Musk is likely to “double down” on his communication tactics, says Minor Myers, a professor of corporate law at the University of Connecticut.
“This is only going to embolden him to act as he sees fit,” Professor Myers said.
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 $US44 billion ($64 billion) in October.
Despite this, other analysts said Mr Musk had no reason to slow down now.
“Many people, when confronted by a lawsuit of this type, would have dialled back tweeting,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “But that wasn’t the case in the Twitter deal, was it?
“Musk lives by his own rules, or so it seems,” Ms Forrest said.
Mr Musk’s attention has been divided in recent months between Tesla, his rocket company SpaceX and now Twitter.
Tesla investors have expressed concerns that running the social media company has taken up too much of his focus.
Tesla shareholders claim Mr Musk misled them when he tweeted on August 7, 2018, that he was considering taking the company private at $US420 per share, a premium of about 23 per cent to the prior day’s close, and had “funding secured.”A court sketch shows Nicholas Porritt, a lawyer for the Tesla shareholders, making his closing arguments.(AP: Vicki Behringer)none
They say Mr Musk lied when he tweeted later that day that “investor support is confirmed”.
The stock price soared after the tweets and then fell again after August 17, 2018, as it became clear the buyout would not happen.
A lawyer for the shareholders told jurors that the billionaire CEO is not above the law, and should be held liable for the tweets.
“This case ultimately is about whether rules that apply to everyone else should also apply to Elon Musk,” the shareholders’ lawyer Nicholas Porritt said during closing arguments.
An economist hired by the shareholders calculated investor losses as high as $US12 billion.
Karen Woody, an associate professor at Washington and Lee University School of Law, said she thought the case was “rock-solid” against Musk and she was shocked at the verdict.
“He pushed the boundaries, and won,” she said. “I expect Elon is going to write anything he wants.”
Mr Musk himself thanked the jury on Twitter.
“Thank goodness, the wisdom of the people has prevailed,” he wrote.Tesla stock price soared after the tweets and then fell again after it became clear the buyout would not happen.(Reuters: Aly Song)none
Musk testified he believed tweets were truthful
During the three-week trial, Mr Musk spent nearly nine hours on the witness stand, telling jurors he believed the tweets were truthful.
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 back-pedalled on its commitment, Mr Musk said.
He later testified that he believed he could have sold enough shares of his rocket company SpaceX to fund a buyout, and “felt funding was secured” with SpaceX stock alone.Mr Musk spent nearly nine hours on the witness stand.(AP: Jeff Chiu)none
Mr Musk testified that he made the tweets in order to put small shareholders on the same footing as large investors who knew about the deal. But he acknowledged he lacked formal commitments from the Saudi fund and other potential backers.
He said his tweets in general did not always affect Tesla stock the way he expects.
“Just because I tweet something does not mean people believe it or will act accordingly,” Mr Musk told the jury.
His lawyer Alex Spiro said that Mr Musk’s “funding secured” tweet was “technically inaccurate” but that investors only cared that Mr Musk was considering a buyout.
“The whole case is built on bad word choice,” he said. “Who cares about bad word choice?”
“Just because it’s a bad tweet doesn’t make it fraud,” Mr Spiro said during closing arguments.
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