A 7-member jury has vindicated Elon Musk for a 2018 tweet that made Tesla investors lose money. A group of shareholders filed a class-action lawsuit against Musk, Tesla, and Tesla board because Musk’s tweet that he would take Tesla private at $420 per share did not happen, but the market crumbled and Tesla stocks plunged.
On August 7, 2018, Musk tweeted that “Am considering taking Tesla private at $420. Funding secured.” And then later he added, “Investor support is confirmed. The only reason why this is not certain is that it’s contingent on a shareholder vote.” Tesla’s price per share at the time Musk posted the tweet was $344, and it jumped to $387.46 that same day, climbing 11%; but nearly a month later, it plummeted to $263.23, causing investors to lose money.
The lead plaintiff in the shareholder lawsuit is Glen Littleton who claimed that he lost more than 75% of his Tesla investment following Musk’s post-tweet market crash. “I wanted to ensure my livelihood,” Littleton claimed. “This represented a threat to my livelihood.” The lawyer for the plaintiffs, Nicholas Porritt, stated that Musk’s statement of “funding secured” is fraudulent because there was no funding in sight when he made the statement.
Porritt argued that Musk was not close to taking Tesla private when he made the statement in 2018, and he had no funding in sight at the time. He contended that Tesla also had no particular structure for going private, and there was no plan for regulatory approval back then.
But Musk’s lawyers argued that the billionaire was honest when he made the tweet and he had the means of raising the funding, but he held back because he didn’t know the actual number of shareholders that would sign off on the deal. The lead attorney for Musk and Tesla was Alex Spiro, and he stated that “funding was not an issue” because Musk’s “motive was to do right for the shareholders.”
The Securities and Exchange Commission (SEC) fined Musk and Tesla for the 2018 tweet back then, the billionaire reached a number of agreements to get off the hook. He was fined $20 million and Tesla also paid $20 million; he agreed to resign as Tesla chairman but retained his position as the CEO; and he consented to have his tweets vetted by a number of Tesla executives before posting them to Twitter.
Federal Judge Edward M. Chen found Musk guilty of claiming that he had “funding secured” and that his subsequent claims were deceptive. But the jury after an hour of deliberation ruled that Musk’s tweet was not capable of moving the market and that the investors could not have lost money on account of the tweets.
“Thank goodness, the wisdom of the people has prevailed,” Musk tweeted after the jury ruled in his favor. “I am deeply appreciative of the jury’s unanimous finding.”
