A jury deliberated for about an hour, then found Tesla CEO Elon Musk is “not liable” for losses incurred by investors who accused him of fraud based on his tweets in August 2018 that he was thinking of taking the company private, adding “funding secured,” according to reports from The New York Times and CNBC.
The deliberation was exceptionally quick. While cases can be difficult to compare directly, juries took days to deliberate on verdicts for Elizabeth Holmes and Martin Shkreli, both of whom were on trial for fraud. The decision for Musk took a fraction of that time.
With Musk in attendance, the jury in the billionaire’s securities fraud trial heard closing arguments from an attorney representing a class of Tesla investors who claim they suffered big losses as a result of Musk’s tweet. They also heard from Musk’s lawyers, who claimed all he was guilty of was “poor word choice.” Their decision allows Musk to walk away unscathed rather than pay out billions of dollars of damages.
For weeks, the jury has heard a litany of witnesses — including Musk himself — recount the events leading up to and following the August 7th, 2018, tweet.
Musk claimed that meetings with Saudi Arabia’s sovereign wealth fund left him convinced that he would have the funding to take Tesla private. But within weeks, Musk had abandoned the deal, leaving some Tesla investors billions of dollars in the hole. But even before they heard any witnesses, District Court Judge Edward Chen instructed the jury that they should consider Musk’s tweet false, leaving them to decide whether Musk knowingly deceived shareholders, causing them to lose money.
Musk previously agreed to a $40 million settlement with the Securities and Exchange Commission over the tweet, which required him to relinquish his position as chair of the company but not admit to any wrongdoing. (Musk has since argued that he was coerced into the settlement.)
In his closing argument, plaintiffs’ attorney Nicholas Porritt said Musk needs to be held accountable for tweets that were already ruled to be false. “This case ultimately is about whether the rules that apply to everyone else should also apply to Elon Musk,” Porritt argued. “Billionaires don’t get to operate under a different set of rules.”
Porritt walked the jury through the testimony of the Tesla investors who brought the lawsuit as well as various expert witnesses who presented data that he said showed how fluctuations in the stock price in and around the August 7th tweet led them to lose money.
“Elon Musk published tweets that were false, with reckless disregard for the truth,” Porritt said. “And those tweets caused investors harm, lots of harm. That is all that is necessary to find liability here.”
“Just because it’s a bad tweet doesn’t make it fraud.”
Investment banking witnesses previously testified that days after the tweet, they were still trying to determine how the deal would be structured. Musk had testified that, even without the Saudi money, he believed he could take Tesla private with his own wealth, including his stake in his private space company SpaceX, as the foundation of the deal.
But Porritt said that Musk’s tweet was “a lie,” proven by text messages between the Tesla CEO and Yasir Al-Rumayyan, the governor of Saudi Arabia’s Public Investment Fund. Musk tried to bully the Saudi official, threatening to cut him off unless he publicly affirmed the take-private deal, the attorney said.
“Billionaires don’t get to operate under a different set of rules.”
Tesla should also be held liable, he argued, because of the conscious decision to allow Musk and his Twitter feed to serve as the primary source of corporate communication. “Tesla consciously chose to make Elon its public image,” Porritt said, “and specifically his Twitter feed as the primary news and information [source].”
In comparison, Spiro’s closing argument was sprawling and difficult to follow at times, making several references to Musk as a “kid in a witness stand” or a “kid from South Africa.” (Musk is 51 years old.)
Spiro’s core argument rested on convincing the jury to believe that Musk tweeted “funding secured” because he sincerely believed he would have “ample funding” to take Tesla private. The tweet was “technically inaccurate,” Spiro acknowledged, but not fraud.
“Just because it’s a bad tweet doesn’t make it fraud,” Spiro said.
“Elon Musk published tweets that were false, with reckless disregard for the truth.”
“I think I heard [Porritt] say that you should assume Elon Musk committed fraud. Well, he didn’t. Not even close,” Spiro said. “Elon Musk was considering taking Tesla private, and he could have. Funding was not an issue, that is the fundamental truth, which will never change.”
Holding Musk liable for Tesla’s stock fluctuations would represent a fundamental misunderstanding of how the market works, Spiro argued. “Stocks move all the time for lots of reasons,” he said. “They want to punish Musk for using two words, but they move all the time.”
Spiro told jurors that they don’t have to like Musk or his tweets to determine that the lawsuit lacks merit. “Some of his tweets, I don’t like either,” Spiro concluded.
Before the lawyers began their presentations, Musk laughed at a joke made by Chen about whether it’s “metaphysically possible” for plaintiffs to prove a “material misrepresentation.” He also apparently offered his assistance when the court was experiencing IT problems.
But minutes before the jury was seated, Musk was not thinking about his own fate or the outcome of the case. He was tweeting about Twitter.
Update February 3rd, 6:40PM ET: Updated to reflect the jury’s ruling and tweet from Elon Musk.