A US jury has said that Elon Musk, CEO of Tesla Inc, and the company were not responsible for providing false information to investors through Musk’s tweet in 2018.
That stated he had secured funding to make Tesla a private company, reported Reuters.
The plaintiffs sought billions in compensation and the verdict was considered significant for Musk, who frequently expresses his opinions on Twitter. The jury reached a unanimous decision after only two hours of deliberation.
Musk was not present in court when the verdict was read but soon tweeted that he was “deeply appreciative” of the jury’s decision. “Thank goodness, 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 next steps.” Shares of Tesla rose 1.6% in after-hours trading following the verdict.
“A dark chapter is now closed for Musk and Tesla,” Wedbush analyst Dan Ives told Reuters. Ives added that some Tesla investors feared Musk might have to sell more Tesla stock if he lost.
The person holding the title of second-richest in the world has caused legal and regulatory issues through his impulsive Twitter usage, a social media platform they purchased for $44 billion in October.
Minor Myers, who teaches corporate law at the University of Connecticut and who had previously called the investors’ case strong, told Reuters that the outcome was “astounding.”
The US anti-securities fraud law “has always been thought to be this great bulwark against misstatements and falsehoods,” he said. “This outcome makes you wonder if it is up to the job in modern markets,” he said, adding that Musk himself was likely to “double down” on his communication tactics after the verdict.
Recently, Elon Musk’s attention has been split between Tesla, SpaceX, and Twitter, causing concern among Tesla investors that managing the social media platform is taking too much of his attention away from Tesla.
‘BAD WORD CHOICE’
Tesla shareholders accused Elon Musk of misleading them when he tweeted on August 7, 2018 that he was considering taking the company private at $420 per share, with a premium of 23% compared to the previous day’s closing, and that he had secure funding.
They say 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 Aug. 17, 2018, as it became clear the buyout would not happen.
Porritt during closing arguments said the billionaire CEO is not above the law, and should be held be liable for the tweets. “This case ultimately is about whether rules that apply to everyone else should also apply to Elon Musk,” he said.
Musk’s lawyer Alex Spiro countered that Musk’s “funding secured” tweet was “technically inaccurate” but that investors only cared that 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,” Spiro said during closing arguments. An economist hired by the shareholders had calculated investor losses as high as $12 billion.
Throughout the three-week trial, Elon Musk spent close to 9 hours on the witness stand and stated to the jury that he believed his tweets to be truthful. He stated that he had secured the necessary financing, including a verbal agreement from the Public Investment Fund of Saudi Arabia. However, he added that the fund later reversed its commitment.
Musk 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.
During his testimony, Musk stated that his tweets were meant to level the playing field for small shareholders by putting them on par with larger investors who were aware of the deal. However, he admitted that he did not have formal commitments from the Saudi fund or other prospective supporters.
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,” Musk told the jury.