In a federal civil trial that lasted for the last three weeks, Elon Musk, Tesla, and the company’s board were sued by investors who claimed that Musk’s messages on Twitter caused them to suffer losses. Musk had tweeted that he had secured the funding to take Tesla private in 2018, and investors argued that his statements about his plan to take the electric car company private had devastating financial consequences for them. However, a jury decided on Friday that Musk was not liable for the losses suffered by investors.
The lawsuit revolved around two posts on Twitter made by Musk. On August 7, 2018, Musk wrote on Twitter, “Am considering taking Tesla private at $420. Funding secured.” He then wrote, “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.” Tesla’s share price jumped after those posts and then tumbled after the proposal fell apart in less than three weeks.
The federal judge in the case, Edward M. Chen, had already ruled that “funding secured” and Musk’s second statement were untrue, and that Musk was reckless when posting them. Nevertheless, the jurors, seven men and two women, deliberated for about an hour, finding that Musk’s statements did not cause the investors’ losses.
If Musk had lost, he and Tesla might have had to pay billions of dollars in damages to investors who said they had lost money when the company’s stock surged after his statements on Twitter and then tumbled after his plan fizzled. However, the verdict allows Musk to claim vindication for a dark period in his professional life, when Tesla was struggling to increase production of its most affordable car, the Model 3.
“I thought he was crazy to try his chances at trial, given the stakes involved,” said Adam C. Pritchard, a law professor at the University of Michigan, noting the judge’s pretrial rulings. “You’re fighting with one hand behind your back in that situation — and yet he won.”
Musk posted on Twitter, referring to the verdict, “Thank goodness, the wisdom of the people has prevailed!” adding that he was “deeply appreciative” of the decision. A lawyer for the plaintiffs, Nicholas Porritt, said in an email, “We are disappointed with the verdict and considering next steps.”
Throughout the trial, the investors’ lawyers had argued that Musk knew Tesla was nowhere near going private because no individuals and investment funds had committed specific amounts of money to the deal. There was also neither a definitive structure for a private Tesla nor a clear path to regulatory approval for the plan, the lawyers said.
“This case is about whether rules that apply to everybody else should apply to Elon Musk,” Mr. Porritt said during closing arguments. He added that the stock market “only works because there are rules that keep people honest so people can trust information in the market.”
The legal team for Musk and Tesla had argued that the company’s share price may have moved because Musk said he was considering taking Tesla private, a statement that they say was true. They have also argued that funding was actually plentiful but that Musk didn’t have exact numbers because he didn’t know how many shareholders would want to continue owning shares in Tesla once it was no longer on the stock exchange.
“Funding was not an issue,” said Alex Spiro, a lawyer for Musk and Tesla. He added, referring to Musk, that the deal had collapsed because “his motive was to do right for the shareholders.”
A year after Musk floated the idea of taking Tesla private, the company’s stock price began climbing as it put its production problems behind it and was, for a time, one of the best-performing stocks among large companies.