A jury deliberated for about an hour and then found Tesla CEO Elon Musk “not liable” for losses from investors who accused him of fraud based on his tweets in August 2018 that he was considering delisting the company , adding “funding secured,” according to reports from The New York Times And CNBC.
The deliberation was extraordinarily quick. While cases are difficult to compare directly, juries took days to deliberate on verdicts Elizabeth Holmes And Martin Shkreli, both of whom were on trial for fraud. The decision for Musk took a fraction of that time.
In Musk’s presence, the jury in the billionaire’s securities fraud trial heard closing arguments from a lawyer representing a group of Tesla investors who claim to have suffered large losses as a result of Musk’s tweet. They also heard from Musk’s lawyers, who claimed he was only guilty of “bad choice of words.” Their decision allows Musk to walk away unscathed rather than pay billions of dollars in damages.
For weeks, the jury has heard a litany of witnesses — including Musk himself — recount the events leading up to and after the Aug. 7, 2018 tweet.
Musk claimed that meetings with Saudi Arabia’s sovereign wealth fund convinced him he would have the funding to take Tesla private. But within weeks, Musk had exited the deal, leaving some Tesla investors billions of dollars in the hole. But even before hearing witnesses, court judge Edward Chen instructed the jury to consider Musk’s tweet false, leaving them to decide whether Musk had knowingly misled shareholders, causing them to lose money.
Musk previously agreed to a $40 million settlement with the Securities and Exchange Commission over the tweet, requiring him to relinquish his position as chairman of the company but not admit any wrongdoing. (Musk has since argued that he was coerced into the settlement.)
In his closing argument, plaintiffs’ attorney Nicholas Porritt said Musk should be held accountable for tweets already deemed false. “This case is ultimately about whether the rules that apply to everyone should also apply to Elon Musk,” Porritt argued. “Billionaires cannot operate by a different set of rules.”
Porritt guided the jury through the testimony of the Tesla investors who filed the lawsuit, as well as several expert witnesses who presented data he said showed how stock price fluctuations in and around the Aug. 7 tweet caused them to lose money.
“Elon Musk published false tweets, with reckless disregard for the truth,” Porritt said. “And those tweets hurt investors, a lot of damage. That is all it takes to find accountability here.”
“Just because it’s a bad tweet doesn’t make it fraud.”
Investment banking witnesses have 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 using his equity, including his stake in his private space company SpaceX, as the basis of the deal.
But Porritt said Musk’s tweet was “a lie,” proven by text messages between Tesla’s CEO and Saudi Public Investment Fund governor Yasir Al-Rumayyan. Musk tried to bully the Saudi official, threatening to silence him unless he publicly confirmed the takeover deal, the lawyer said.
“Billionaires cannot operate by a different set of rules.”
Tesla should also be held liable, he argued, for its conscious choice to let Musk and his Twitter feed serve as the primary source of corporate communications. “Tesla made a conscious decision to make Elon its public image,” Porritt said, “and specifically its Twitter feed as the primary news and information [source].”
In comparison, Spiro’s closing argument was long-winded and at times difficult to follow, with several references to Musk as a “child on a witness stand” or a “child 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 “sufficient funding” to take Tesla private. The tweet was “technically inaccurate,” Spiro acknowledged, but not a fraud.
“Just because it’s a bad tweet doesn’t make it fraud,” Spiro said.
“Elon Musk published false tweets, with reckless disregard for the truth.”
‘I think I heard it [Porritt] say you should assume that Elon Musk has committed fraud. Well, he didn’t. Not even close,” Spiro said. “Elon Musk considered taking Tesla private, and he could have done that. Funding was not a problem, that is the fundamental truth, which will never change.”
Holding Musk responsible for Tesla’s stock fluctuations would be 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 they don’t have to like Musk or his tweets to determine the lawsuit is baseless. “I don’t like some of his tweets either,” Spiro concluded.
Before the lawyers started their presentations, Musk laughed to a joke by Chen about whether it is “metaphysically possible” for plaintiffs to prove a “material misrepresentation”. Apparently he too offered his help when the court had IT problems.
But minutes before the jury was seated, Musk was not thinking about his own fate or the outcome of the case. He tweeted about Twitter.
Update February 3, 6:40 PM ET: Updated to reflect the jury verdict and tweet from Elon Musk.