Elon Musk is said to be not liable in a class-action securities fraud trial centered on the now notorious Tesla CEO. “guaranteed funding” tweet.
After less than 90 minutes of deliberation, the jury announced its verdict in a trial that began three weeks ago in San Francisco. The results of the test sent Tesla shares up about 1.5% in after-hours trading to $189.98.
musk tweeted on friday after the jury’s verdict: “Thank goodness the wisdom of the people prevailed! I appreciate the jury’s unanimous verdict on innocence in the Tesla private case 420.”
The central question in the lawsuit is whether Musk is liable for losses suffered by shareholders after he posted several announcements on Twitter in August 2018 that he had secured funds. funding to privatize Tesla. musk originally tweeted “I am considering privatizing Tesla for $420. Funding is guaranteed.” Another couple tweet soon followed by: “Investor support confirmed. The only reason this is uncertain is that it depends on shareholder votes” and then another reason said that he currently has no controlling votes and “wouldn’t expect any shareholder get it if we make it private.”
The plaintiffs’ attorneys representing the investors argued that the shareholders suffered financial losses as a result. Musk, Tesla and its boards face billions of dollars in damages.
The test is not to determine if those tweets are true or not. That question has been answered. Edward M. Chen, the federal judge overseeing the case, ruled that the tweets were untrue and that Musk was reckless in posting them.
The three-week trial was largely a tug of war over language and intent.
Attorney Nicholas Porritt, who provided the final argument for the plaintiffs, argued that when Musk posted the tweets, the company barely reached an agreement to go private, citing emails and text messages. to demonstrate that there is no agreement or even a framework for reaching an agreement.
“For Elon Musk, if he believes it even just thinking about it, it’s true no matter how objectively misleading or exaggerated it may be,” Porritt said. “That could work in his business. That’s not a problem for this test. But it doesn’t work in the stock market or public company. The stock market has rules that govern what you can and cannot say. And one of those basic rules is that what you say must be true and correct.”
Alex Spiro, who represents Musk, countered, claiming throughout his final arguments that funding was not an issue at all and Musk knew he could get there if needed. Instead, Spiro pointing to a blog post weeks after Musk’s tweet explained that Musk would not take Tesla private because existing shareholders believe it’s better off as a publicly traded company.
While Musk avoided a huge damages bill, the guaranteed tweet about funding cost him.
The US Securities and Exchange Commission filed a complaint in September 2018, alleging that Musk lied when he wrote on Twitter that he had “secured funding” for the acquisition of the private company. multiplied by $420 per share. The complaint was filed after the boards of Musk and Tesla abruptly abandoned their agreement with the SEC. The board of directors not only withdrew from the agreement, but also issued a statement of strong support for Musk after the charges were filed.
Either way, an agreement was finally reached, albeit with more severe penalties than the original agreement. Musk agreed, in a settlement reached on September 29, to step down as Tesla chairman and pay a $20 million fine. Tesla has agreed to pay a separate $20 million fine.
