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Jury finds Elon Musk did not defraud investors

By Sarah May
|
February 4, 2023

After roughly two hours of deliberations, a jury in California on Friday found that Tesla CEO Elon Musk is not liable for alleged investor losses stemming from a message he posted on Twitter back in 2018 discussing the possibility of taking the electric vehicle company private, as NBC News reports.

The outcome represents a big win in what was viewed by many as a significant gamble taken by the mercurial billionaire in choosing to fight back against a securities class action lawsuit.

“Funding secured”

At issue in the case was a message Musk posted to the social media platform he now owns, in which he suggested that he had “funding secured” to take the automaker private, as Axios noted.

The tweet at the center of the controversy read simply, “Am considering taking Tesla private at $420 [per share]. Funding secured.”

Later that same day, Musk tweeted again on the topic, stating, “Investor support is confirmed.”

Shareholders subsequently filed suit against Musk, claiming that they suffered billions of losses as a result of the CEO's representations, which ultimately did not come to fruition anyhow.

Musk fights back

As Reuters noted, Musk's decision to aggressively defend against the lawsuit was a bold one, given that corporate executives routinely steer clear of taking the stand in cases of this nature, but it was one that ultimately paid dividends, as evidenced by Friday's result.

The move appeared even riskier last year, when the judge determined that the tweet in dispute was indeed “false” and “reckless.”

As a result of that finding, the jury was charged only with assessing whether Musk's statements did affect Tesla share prices and whether he acted knowingly in making the representations, and also with determining the amount of damages sustained as a result.

University of Connecticut law professor Minor Myers opined earlier this month that, because of those facts, “Everything is lined up for a plaintiffs' win here,” and that the shareholder claimants were “starting with runners on base.”

Handshake agreement

Undeterred by predictions of long odds, Musk took the stand at trial, explaining that at the time of his 2018 tweets, he was of the belief that he had secured a “handshake agreement” with Saudi Arabia's Public Investment Fund for the resources needed to take Tesla private, as NBC News noted.

Eventually, however, the Saudis backed out of the arrangement, Musk told the jury.

“I had no ill motive. My intent was to do the right thing for all shareholders,” Musk added.

Though the shareholders' attorneys attempted to argue that no such agreement had ever been formally put into place and that Musk was furthering his own interests at the expense of investors, the jury disagreed, finding the company's chief not liable for the damages alleged.

Litigants react

Following the verdict, attorney Nicholas Porritt, who represented the investors in their battle with Musk, said, “We are disappointed with the verdict and are considering next steps,” as Reuters noted separately.

Musk for his part, expressed his relief over the outcome, declaring, “Thank goodness, the wisdom of the people has prevailed.”

“I am deeply appreciative of the jury's unanimous finding of innocence in the Tesla 420 take-private case,” Musk added.

Notably, following the verdict's announcement, the prices of Tesla shares increased 1.6% in after-hours trading, and, as NBC News noted, they are now worth over eight times the value they represented at the time of Musk's 2018 tweet, suggesting perhaps that in terms of the company having remained public, all's well that ends well – at least so far.