Jury rules for Elon Musk and Tesla in investor lawsuit over tweets

A jury ruled on Friday that Elon Musk was not responsible for losses suffered by investors after posting messages on Twitter saying he secured funding to take Tesla private in 2018.

Investors had sued Mr Musk, Tesla and the company’s board, arguing that his statements about his embryonic plan to take the electric car company private had devastating financial consequences for them. But in a federal civil trial in San Francisco over the past three weeks, attorneys for Tesla and Mr. Musk, the automaker’s chief executive, argued he was such a successful businessman that he could have easily obtained financing to take Tesla private.

Two Twitter posts by Mr. Musk were at the heart of the matter. On August 7, 2018, he wrote on Twitter: “I’m considering privatizing Tesla at $420. Financing assured. Then he wrote“Investor support is confirmed. The only reason it’s not certain is that it depends on a shareholder vote. Tesla’s stock price surged after those posts, then fell after the proposal fell through in less than three weeks.

The federal judge hearing the case, Edward M. Chen, had previously ruled that Mr. Musk’s “secured funding” and second statement were false, and that Mr. Musk was reckless in releasing them.

The jurors – seven men and two women – deliberated for about an hour, finding that Mr Musk’s statements did not cause losses to investors. The verdict allows Mr Musk to claim vindication of a dark period in his professional life, when Tesla struggled to ramp up production of its most affordable car, the Model 3.

“I thought it was crazy to take a chance at trial, given the stakes at stake,” said University of Michigan law professor Adam C. Pritchard, noting the judge’s pretrial rulings. “You fight with one hand behind your back in this situation – and yet he won.”

Had he lost, Mr. Musk and Tesla might have had to pay billions of dollars in damages to investors who said they lost money when the company’s shares surged after his statements on Twitter, then fell after the failure of his plan.

“Thank God the wisdom of the people prevailed! Mr. Musk posted on Twitterreferring to the verdict, adding that he was “deeply grateful” for the decision.

A lawyer for the plaintiffs, Nicholas Porritt, said in an email: “We are disappointed with the verdict and are considering next steps.”

After the verdict was read, three jurors answered questions from plaintiffs’ attorneys. A male juror said their arguments were difficult to follow and at times seemed disorganized.

“There was nothing there to give me an ‘aha’ moment,” he said, later adding, “Elon Musk is a guy who might sneeze and the stock market might react.”

Throughout the lawsuit, attorneys for the investors had argued that Mr Musk knew Tesla was far from private because no individual or investment fund had committed specific amounts of money to the deal. . There was also no definitive structure for a private Tesla or a clear path to regulatory approval for the plan, the lawyers said.

“This case is about whether the rules that apply to everyone should apply to Elon Musk,” Porritt said during oral argument. He added that the stock market “only works because there are rules that keep people honest, so people can trust market information.”

Mr. Musk and Tesla’s legal team had argued that the company’s share price may have moved because Mr. Musk said he was considering taking Tesla private, a claim they said , was true. They also argued that the funding was in fact plentiful, but that Mr. Musk did not have exact figures because he did not know how many shareholders would want to continue to hold shares of Tesla once it is no longer. in stock exchange.

“Funding was not an issue,” said Alex Spiro, attorney for Mr. Musk and Tesla. He added, referring to Mr Musk, that the deal fell apart because “his motive was to do good for shareholders”.

A year after Mr Musk floated the idea of ​​taking Tesla private, the company’s share price began to climb as it put its production troubles behind it and was for a time one of the best performing stocks among large companies. Its stock price fell 65% last year as competition in the electric car market intensified and Tesla slashed car prices. But the stock price has jumped about 50% this year.

The deal ended less than four months after Mr. Musk acquired Twitter, which is headquartered half a mile from federal court in San Francisco.

In 2018, Mr. Musk and Tesla settled a separate lawsuit with the Securities and Exchange Commission over his plan to take Tesla private. They paid $40 million in fines to the SEC, and Mr. Musk agreed to resign as Tesla chairman and allow a lawyer to review certain statements about Tesla before Mr. Musk released them on the social networks. Mr. Musk is currently trying to terminate parts of that agreement in the United States Court of Appeals for the Second Circuit.

Mr. Pritchard, the law professor, said he did not believe Mr. Musk’s victory would lead to other CEOs making off-the-cuff statements that could move stock prices. “Most CEOs will do what their general counsel tell them to do in situations like this,” he said.

Legal experts said most executives and companies would have settled the investors’ lawsuit. But Mr. Musk has often been willing to fight lawsuits in court. In 2019, a federal jury in Los Angeles decided he did not defame a British cave diver by calling him a “pedo guy” on Twitter. The pair were engaged in an acrimonious argument over the rescue of children trapped in a cave in Thailand a year earlier.

A Delaware judge is expected to rule soon on a lawsuit brought by a Tesla shareholder who argues that the company’s board of directors did not act independently of Mr. Musk when designing a lucrative compensation package for him in 2018. The shareholder asked the court to void the compensation deal, which gave Mr. Musk the right to acquire nearly $50 billion in Tesla stock.