News/Commentary

Jury hands Elon Musk huge legal win over Tesla tweets: ‘The whole case is built on bad word choice’

February 4, 2023 | | Print Article

After roughly two hours of deliberation, a U.S. jury unanimously found on Friday that Tesla Inc. CEO Elon Musk and his company were not liable for billions of dollars in damages for a string of 2018 tweets in which Musk said he had “funding secured” to take Tesla private at “$420” per share.

The average Twitter user likely laughed the tweet off, as “420” is the universal stoner code for “time to smoke a joint.”

It’s a number that finds its way into a lot of Musk’s tweets, along with another number that means something else entirely.

But, in 2018, Musk appeared to be seriously considering the idea of taking Tesla private.

“My hope is *all* current investors remain with Tesla even if we’re private,” he replied to one user who was concerned that investors would “miss out on the upside” of their investments.

“Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment,” Musk added.

He assured another user that he wasn’t looking for “forced sales.”

“Def no forced sales,” he vowed. “Hope all shareholders remain. Will be way smoother & less disruptive as a private company. Ends negative propaganda from shorts.”

According to the lawsuit that was launched against him, Tesla shareholders felt misled by the tweets. His proposed $420 per share was “a premium of about 23% to the prior day’s close,” Reuters reports.

Later in the day, Musk reportedly doubled down on the plan with what appears to be a now-deleted tweet claiming that “investor support is confirmed” — an assertion that, according to Reuters, shareholders claimed was a lie.

“The stock price soared after the tweets and then fell again after Aug. 17, 2018, as it became clear the buyout would not happen,” Reuters writes.

With the help of a hired economist, the shareholders calculated their losses at a staggering $12 billion.

In his closing arguments, Musk’s attorney, Alex Spiro, told the jury that his client’s “funding secured” tweet was “technically inaccurate,” but that wasn’t the point. The investors, he said, were only concerned with the notion of Musk considering a buyout.

“The whole case is built on bad word choice,” Siro said. “Who cares about bad word choice?”

“Just because it’s a bad tweet doesn’t make it fraud,” he argued.

But, during his nearly nine hours on the witness stand during the three-week trial, Musk testified that he believed his tweets were truthful.

“He said he had lined up the necessary financing, including a verbal commitment from Saudi Arabia’s sovereign wealth fund, the Public Investment Fund,” Reuters reports. “The fund later backpedaled on its commitment, Musk said.”

He also stated under oath that he felt, with a sale of SpaceX shares, “funding was secured” for the Tesla buyout based on SpaceX stock alone.

“Musk testified that he made the tweets in order to put small shareholders on the same footing as large investors who knew about the deal,” explains Reuters. “But he acknowledged he lacked formal commitments from the Saudi fund and other potential backers.”

Minor Myers teaches corporate law at the University of Connecticut and he had previously claimed the case against Musk was strong.

When the verdict came down, Myers said the outcome was “astounding.”

According to him, the U.S. anti-securities fraud law “has always been thought to be this great bulwark against misstatements and falsehoods.”

“This outcome makes you wonder if it is up to the job in modern markets,” he stated.

In a statement following the decision, Nicholas Porritt, who represented the investors, said, “”We are disappointed with the verdict and are considering next steps.”

Musk, who was not present in court for the jury’s verdict, is understandably thrilled with the outcome.

“Thank goodness, the wisdom of the people has prevailed!” he tweeted on Friday. “I am deeply appreciative of the jury’s unanimous finding of innocence in the Tesla 420 take-private case.”

And users on the Chief Twit’s platform were quick to offer their congratulations:

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Melissa Fine
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