Elon Musk found not liable over Tesla tweets

A US jury has found Tesla CEO Elon Musk not liable in a securities fraud case over a tweet that he had lined up funding to take the electric car company private.

Plaintiffs had claimed billions in damages and the decision also had been seen as important for Musk himself, who has aggressively fought any charges that he was guilty and defended his ability to tweet broadly. 

A nine-person jury began deliberations in San Francisco federal court on Friday on whether Musk’s tweets artificially inflated Tesla’s share price by playing up the likelihood of a buyout, and if so by how much.

Unhappy shareholders accused the Tesla chief executive officer of misleading them on August 7, 2018, by tweeting that he was considering taking the electric car maker private at $420 per share and had “funding secured.”

The price was 23 per cent above Tesla’s last closing price, valuing the company at $72 billion. Shareholders also said Musk lied by tweeting later that day that “investor support is confirmed.”

With Musk looking on, shareholder lawyer Nicholas Porritt emphasised during his closing argument how US District Judge Edward Chen had ruled before trial that Musk’s tweeting was false and reckless.

“This case ultimately is about whether rules that apply to everyone else should also apply to Elon Musk,” Porritt said.

Musk’s lawyer, Alex Spiro, countered during his closing argument that funding was “not an issue” for a Tesla buyout, and that Musk was not the “rich liar” and “fire-breathing, tweeting monster” that he said the shareholder lawyers tried to portray.

Investors were seeking billions of dollars in damages from Musk, Tesla and several company directors, in a test of Musk’s liability for his sometimes impulsive use of Twitter. He bought that company in October for $44 billion.

Porritt told jurors that Tesla should be liable because it let Musk use Twitter to disseminate corporate information, and recognised that “when Elon tweets about Tesla, people listen.”

Tesla’s share price traded above where it had been before Musk’s tweets for much of the 10-day period covered by the lawsuit, but fell as it became clear no buyout would happen.

Spiro rejected shareholders’ claim that some of that decline stemmed from an August 17, 2018, New York Times story questioning the funding.

He said the decline was prompted by concern about Musk’s health, from the stress of trying to build more Tesla Model 3 sedans.

Spiro also said the “funding secured” tweet was “technically inaccurate” but not fraudulent, and did not “move the market” by pushing up Tesla’s stock price.

During the three-week trial, jurors heard testimony from witnesses including Tesla directors, Musk’s financial advisers and Musk himself.

Musk testified that he received a verbal commitment from Saudi Arabia’s sovereign wealth fund, and could have used his stake in SpaceX, a rocket company where he is also CEO, to fund a buyout, but admitted he lacked specific commitments from potential backers.

The defence has said that in tweeting, Musk was focused on making sure small shareholders had the same information as large investors who knew about the potential buyout.