Tesla Inc (TSLA.O) CEO Elon Musk and his company were found not guilty by a U.S. jury on Friday for misleading investors when Musk tweeted in 2018 that he had “funding secured” to take the electric vehicle firm private.
Plaintiffs sought billions in damages, and the judgment was considered as significant for Musk, who frequently uses Twitter to express his opinions.
After about two hours of deliberation, the jury returned with a unanimous verdict.
Musk was not in court when the judgement was given, but he quickly tweeted that he was “truly grateful” for 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 said. Ives added that some Tesla investors feared Musk might have to sell more Tesla stock if he lost.
The world’s second-richest individual has previously caused legal and regulatory issues due to his occasionally rash use of Twitter, the social media firm he purchased for $44 billion in October.
Minor Myers, a business law professor at the University of Connecticut who previously praised the investors’ case, praised the decision “astounding.
“The anti-securities fraud statute in the United States has traditionally been believed to be this wonderful bastion against misstatements and falsehoods,” he remarked. “This result makes you ask if it is up to the job in modern markets,” he said, adding that Musk was likely to “double down” on his communication strategies in the aftermath of the verdict.
Musk’s attention has recently been divided between Tesla, his rocket business SpaceX, and now Twitter. Tesla investors have expressed concern that Tesla’s focus has shifted too far away from the social media firm.
‘BAD WORD CHOICE’
Tesla shareholders alleged Musk misled them on Aug. 7, 2018, when he tweeted that he was considering taking the business private at $420 per share, a 23% premium to the previous day’s closing, and that he had “financing secured.”
They claim Musk lied later that day when he tweeted, “Investor support is confirmed.”
The stock price rose following the tweets, only to fall again after August 17, 2018, when it became evident that the takeover would not take place.
During closing arguments, Porritt stated that the billionaire CEO is not above the law and should be held accountable for his comments.
“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 a fraud,” Spiro said during closing arguments.
An economist hired by the shareholders had calculated investor losses as high as $12 billion.
During the three-week trial, Musk spent nearly nine hours on the witness stand, telling jurors he believed the tweets were truthful. He said he had lined up the necessary financing, including a verbal commitment from Saudi Arabia’s sovereign wealth fund, the Public Investment Fund. The fund later backpedaled on its commitment, Musk said.
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.
Musk testified that he made the tweets in order to put small shareholders on the same footing as large investors who knew about the deal. But he acknowledged he lacked formal commitments from the Saudi fund and other potential backers.
The verdict is another victory for Musk and his lawyer Spiro after they won a defamation lawsuit against the billionaire in 2019 over his tweet calling a cave explorer a “pedo guy”.
