Musk Escapes Liability in Lawsuit over Tesla ‘Funding Secured’ Tweet
Tesla CEO Elon Musk recently won a lawsuit brought against him by Tesla investors who claimed they were financially affected by his infamous 2018 “funding secured” tweets about taking the company private.
The Wall Street Journal reports that Tesla CEO Elon Musk recently won a significant legal battle over infamous tweets he made in 2018 about having “funding secured” to take Tesla private. A jury rejected investor complaints that the tweets broke federal securities law because the plaintiffs could not demonstrate any harm that the tweets had caused them.
Musk tweeted in August 2018 that he was thinking about going private with Tesla and claimed that he had “funding secured” for the transaction. The deal never happened, despite the tweets’ huge impact on the financial community. The Securities and Exchange Commission (SEC) accused Musk of securities fraud due to the tweets, and he settled for $20 million. Musk, however, saw the recent investor lawsuit as a chance to clear his name.
Glen Littleton, the lead plaintiff, claimed during the trial that the tweets threatened his livelihood because they forced him to liquidate some investment positions. On the other hand, Musk asserted that he was sure he had the money to take Tesla private and that his goal was to update shareholders. “I was trying my best to keep shareholders informed and ensure that all shareholders had the same information,” Musk told jurors. Musk further added that while he and Saudi Arabian investors did not discuss a specific price, he testified that he was confident that the nation was ready to assist with the privatization.
The case going to trial was very unusual. From 1997 to 2001, excluding those involving mergers or acquisitions, less than 0.2 percent of federal securities class-action cases went to trial, according to Cornerstone Research. Both plaintiffs and defendants have prevailed in about half of the few cases that did reach that stage. Former SEC commissioner and Stanford Law School professor Joseph Grundfest said that these cases typically settle because there is such a high chance of losing at trial.
The CEO was found to have acted recklessly in making the claims about the potential privatization, according to a previous ruling by U.S. District Judge Edward Chen. Jurors had to determine whether the tweets materially affected investors and whether they resulted in losses for them. In the end, the jury dismissed the investors’ claims and found in favor of Musk.