Musk defeats Tesla shareholder suit over 2018 'funding secured' tweets
SAN FRANCISCO — A jury cleared Elon Musk of claims by Tesla Inc. investors that he defrauded them when he tweeted 4 1/2 years ago that he was considering taking the company private and had “funding secured” to make the deal happen.
The verdict in San Francisco federal court rejects allegations that the electric-car maker’s CEO violated securities laws and should pay billions of dollars in damages. The finding is a major vindication for Musk, whose August 2018 tweets got him and Tesla sued by the US Securities and Exchange Commission, and once again proves that the billionaire is difficult to beat in court.
The outcome, after a three-week trial, is a bitter loss for the shareholders who sought to recoup trading losses from fluctuations in Tesla shares after Musk posted the messages. Musk abandoned the take-private plan about two weeks after his initial tweets.
Musk’s victory on Friday, after about two hours of jury deliberations, will be cause for celebration for his fans on Twitter who support his vows to champion free speech on the social media platform he acquired in October for $44 billion.
“The jury got it right,” Alex Spiro, a lawyer for Musk, said after the verdict, declining further comment.
Nicholas Porritt, a lawyer for the investors, couldn’t immediately be reached for comment.
‘Nobody does this — only Elon does this’
For Musk himself, who has a long and controversial record of tweeting whatever comes into his head about business, politics and culture, the outcome of the trial may not matter much because even a loss wasn’t likely to make him change his ways.
The verdict isn’t likely to become a precedent that spurs more free-wheeling corporate disclosures on social media, said Adam Pritchard, a professor at University of Michigan Law School. That’s because other CEOs will continue to use conventional methods to communicate about company business, he said.
“Nobody does this — only Elon does this,” Pritchard said before the verdict. “He’s incorrigible. I don’t think his behavior can be reformed. There’s just too long of a track record of too much mischief.”
Though many executives testified, the three-week trial was all about Musk, its star witness.
At one point while the billionaire was on the stand, the lead lawyer for the shareholders mistakenly referred to Musk as “Mr. Tweet,” a name he seemed to enjoy and briefly embraced as the handle for his Twitter account.
Musk’s defense asked jurors to imagine a world through the entrepreneur’s eyes, in which a $60 billion deal to take Tesla private could be done on a handshake. The jury learned of his relationship with Yasir Al-Rumayyan, the governor of Saudi Arabia’s Public Investment Fund, and a 2017 dinner with him joined by Softbank CEO Masayoshi Son, where taking Tesla private was discussed.
Musk testified that the “funding secured” tweet was “absolutely truthful,” touting what he described as an “unequivocal” commitment by Saudi Arabia even though he had nothing in writing.
Musk gave jurors other reasons to believe him. He said he felt compelled to reveal that he was considering taking Tesla private because earlier that day, the Financial Times reported that Saudi Arabia was building a sizable stake in Tesla.
He testified he was afraid his going-private plans might also be leaked, and that he wanted to put all Tesla investors on equal-footing by broadcasting his plans on Twitter. Musk also said that if required, he could’ve divested his ownership stake in his closely held rocket-ship company, SpaceX, to fund the transaction.
In the end, the billionaire prevailed despite evidence showing that Musk’s bankers had been barely consulted and hadn’t formally signed on to his take-private plan.
Investment banking witnesses, including senior Goldman Sachs executive Dan Dees and Silver Lake Management’s co-CEO, Egon Durban, told jurors that even a week after the tweet, they were still working to figure out how the deal would be structured, including who would pay for it.
Musk is no stranger to courtroom battles and he’s been nicknamed “Teflon Elon” for his ability to escape unscathed. He took the stand and prevailed in trials in 2019 in Los Angeles and in 2021 in Delaware. He also testified in November in a Delaware investor case over his $55 billion Tesla pay package — but that one hasn’t been decided yet.
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