Jury sides with Elon Musk over 2018 tweets claiming he would take Tesla private

 

Jury sides with Elon Musk over 2018 tweets claiming he would take Tesla private

 

The verdict comes after a three-week trial that pitted shareholders against the billionaire and company CEO

 

Kari Paul and Erin McCormick in San Francisco

Fri 3 Feb 2023 22.45 GMT

https://www.theguardian.com/technology/2023/feb/03/elon-musk-tesla-investors-lawsuit-twitter

 

Elon Musk and Tesla have been cleared of wrongdoing in a lawsuit over a pair of tweets from the executive that investors say cost them billions of dollars.

 

After less than two hours of deliberation wrapping up a three-week trial, a jury in San Francisco ruled on Friday that the Tesla CEO had not deceived investors with two tweets posted in August 2018 about a Tesla buyout that never happened.

 

Musk had tweeted that he planned to take the electric carmaker private at $420 per share, and had “funding secured” to do so. The posts triggered stocks to surge over a 10-day period before falling back after Musk abandoned the deal, investors argued.

 

The decision marks an important victory for Musk, who is embroiled in several lawsuits and has aggressively fought any charges that he was guilty. The executive, who now is the CEO of Twitter after purchasing the company months ago for $44bn, has repeatedly defended his ability to tweet broadly.

 

The case was seen as a test of whether or not Musk could be held liable for his freewheeling use of Twitter. The billionaire testified on multiple days of the trial, arguing that his tweets were a democratic way to communicate and did not always affect Tesla stock the way he expected. “Just because I tweet something does not mean people believe it or will act accordingly,” he told the jury.

 

“Thank goodness, the wisdom of the people has prevailed!” Musk tweeted following the verdict. “I am deeply appreciative of the jury’s unanimous finding of innocence in the Tesla 420 take-private case.”

 

The first tweet under scrutiny, posted just before he boarded his private jet, Musk declared he had “funding secured” to take Tesla private. A few hours later, Musk sent another tweet indicating that the deal was imminent. The price Musk chose - $420 – is widely considered to be a marijuana reference, further rankling investors who believed he was not taking the business seriously. Musk claimed during the trial the number was “not a joke” and any associations with cannabis were merely coincidence.

 

Musk appeared in court on Friday for closing arguments, even though his presence wasn’t required, underscoring the importance of the trial’s outcome to him. In closing statements he was both vilified as a rich narcissist whose reckless behavior risks “anarchy” and hailed as a visionary looking out for the “little guy”.

 

Nicholas Porritt, a lawyer for the Tesla shareholders, urged the jurors to rebuke Musk for his “loose relationship with the truth”.

 

“Our society is based on rules,” Porritt said. “We need rules to save us from anarchy. Rules should apply to Elon Musk like everyone else.”

 

Alex Spiro, Musk’s attorney, conceded the 2018 tweets were “technically inaccurate”. But he told the jurors: “Just because it’s a bad tweet doesn’t make it a fraud.”

 

US district judge Edward Chen, who presided over the trial, decided last year that Musk’s 2018 tweets were false and has instructed the jury to view them that way.

 

In addition to the class action lawsuit, Musk faced fraud charges in 2018 from the Securities and Exchange Commission over the tweets, and was required to pay $40m in penalties. As part of his settlement with the US agency, Musk had to agree to a requirement his tweets be approved by a Tesla attorney before being published – a clause he has been accused of violating multiple times since.

 

During his roughly eight hours on the stand, Musk insisted he believed he had lined up the funds from Saudi Arabia’s Public Investment Fund to take Tesla private after eight years as a publicly held company. He defended his initial August 2018 tweet as well-intentioned and aimed at ensuring all Tesla investors knew the automaker might be on its way to ending its run as a publicly held company.

 

 

“I had no ill motive,” Musk testified. “My intent was to do the right thing for all shareholders.”

 

In his concluding remarks, Porritt told jurors their decision boiled down to their answer to one question: “Do the rules apply to everyone, or can Elon Musk do whatever he wants and not face the consequences?”

 

Experts observing the case said the outcome showed the jury bought Musk’s side of the argument.

 

“Musk won this one; hang one up on the scorecard for him,” said Josh White, an assistant professor of finance at Vanderbilt University, who said he has no doubt the case will be appealed. “So the drama’s not over.”

 

He described the closing arguments by Spiro, Musk’s attorney, as “almost something scripted out a Hollywood movie”.

 

“He was almost in tears,” making the case that Musk truly believed he had the funding to take Tesla private, said White, who is a former financial economist for the US Securities and Exchange Commission.

 

White said he felt the plaintiffs’ attorneys did a “poor job” in making the case that Musk meant to manipulate Tesla’s stock price.

 

“I felt like they never really made the case that Musk’s intent in sending the tweet was to move the stock price,” he said. “They never went down that path, which I found surprising.” White also said Musk managed to turn his own testimony in a direction that may have impressed the jury.

 

“Musk is really good at testifying,” he said, noting that he often managed to subtly shift the questions asked of him. “He took control of the conversation and rephrased it in a way that benefitted him.”

 

Others expressed amazement at the jury’s decisiveness. “I was surprised the jury came back so quickly,” said law professor Stavros Gadinis, director of UC Berkeley’s Center for Law and Business.

 

“I think they fell for the argument that Musk did not set out to deceive investors, but that he really believed that he had the funding [to take Tesla private].”

 

Loyola law professor Jessica Levinson said the case may end up influencing how other companies fight security fraud cases in the future.

 

“Musk was vindicated not just in his defense strategy, but in his decision to go to trial at all,” said Levinson, who said she was also surprised by the verdict and the speed at which it was reached. “Because taking this to trial was hugely risky, right? He potentially faced huge fines and he settled the SEC case.”

 

She said the case could become a bellwether for companies taken to task for statements made on Twitter and similar sites.

 

“It’s one of the first big cases where the statements at issue were made over social media,” she said. “It definitely gives a roadmap for companies trying to defend statements made on social media.”

 

Agencies contributed reporting