Elon Musk, CEO of Tesla, SpaceX and Twitter, has successfully defended himself in a class action lawsuit claiming damages from his infamous tweet where he claimed to have “funding secured” for taking Tesla private.
After a three-week long trial, a nine-person jury unanimously ruled in Musk’s favour. Musk wasn’t in court to hear today’s verdict, but took to the social media platform he now owns to say, “Thank goodness, the wisdom of the people has prevailed.”
Plaintiffs had sought billions in dollars of damages resulting from Musk’s August 8, 2018 tweet where he stated: “Am considering taking Tesla private at $420. Funding secured.”
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He followed up a few hours later, stating: “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”
A week later, Musk admitted funding wasn’t secured, but that there had been positive discussions with Saudi Arabia’s sovereign wealth fund, where he inferred the fund “obviously” had the means to help the automaker go private.
Edward Chen, the judge presiding over the case, ruled last year Musk’s “funding secured” claims were false, and instructed the jury to see it as such.
The first tweet caused Tesla’s share price to spike about 11 per cent to around US$380. The plaintiffs argued Musk’s tweets were designed to manipulate the company’s share price, which fell sharply two weeks later when Tesla cancelled plans to go private.
At the time Musk cited “internal compliance issues that limit how much [large investors] can invest in a private company”, and said the whole process was “more time-consuming and distracting than initially anticipated”.
Musk appeared on the stand to defend himself, reiterated his belief about funding, and claimed: “I had no ill motive. My intent was to do the right thing for all shareholders.”
During closing arguments for the case, Nicholas Porritt, a lawyer representing the investors, said: “Our society is based on rules. We need rules to save us from anarchy. Rules should apply to Elon Musk like everyone else.”
Alex Spiro, one of Musk’s attorneys, admitted the CEO’s tweets were “technically inaccurate”, but countered that “just because it’s a bad tweet doesn’t make it a fraud”.
After the verdict, Porritt said in a statement seen by Reuters, “We are disappointed with the verdict and are considering next steps”.
Tesla shares rose a few dollars in after hours trading after the verdict was announced. It’s widely thought investors were worried Musk would have to sell more Tesla shares to pay for damages resulting from a guilty verdict.
The Tesla CEO has watered down his shareholding in the automaker multiple times to fund his US$44 billion ($63.5 billion) purchase of Twitter.
Tesla’s value has fallen by almost half since Musk took control of Twitter, partially due to his large stock sell downs, but also due to his controversial stewardship of the social media company, and his perceived lack of focus on the automaker.
This isn’t the first time Musk’s “funding secured” tweet has landed the outspoken CEO in financial trouble. In September 2018 he settled a case brought by the US Securities and Exchange Commission (SEC), where he agreed to a US$20 million fine and to step down as chairman, although he was allowed to continue as CEO.
After the settlement, Steven Peikin, co-director of the SEC Enforcement Division, told the press: “Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders.
“An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”