Jury Finds Musk Not Liable for Tesla ‘Funding Secured’ Tweet

A San Francisco federal jury found Tesla (TSLA) CEO Elon Musk not liable late Friday for shareholder losses following his tweet suggesting he had secured funding for a buyout of the electric car company.

No such buyout happened, and Tesla shares’ 11% gain on the day of the August 2018 tweet evaporated over the next week. Plaintiffs argued the tweet cost Tesla shareholders $12 billion in capital losses. The jury sided with the billionaire tycoon after deliberating for about an hour even though Judge Edward Chen instructed it at the outset of the trial to assume Musk’s tweet was false and reckless.

At issue in the trial was whether Musk realized no deal had been struck, and whether his tweets about the buyout were material for investors. Musk maintained on the witness stand that he thought a funding deal was done based on discussions with the Saudi sovereign wealth fund. Court filings showed the head of the fund texted Musk days after the tweet making clear that no deal had been reached.

“Just because I tweet something does not mean people believe it or will act accordingly,” Musk testified at the trial. His lawyer, Alex Spiro, told the jury that plaintiffs wanted Musk to pay for their losses from market speculation. “Just because it’s a bad tweet doesn’t make it fraud,” Spiro said.

Musk tweeted on Aug. 7, 2018: “Am considering taking Tesla private at $420. Funding secured.” Spiro argued in his closing argument that the word “considering” in the tweet made clear Musk had not yet decided to go through with the deal.

Nicholas Porritt, a lawyer for the plaintiffs, asked the jury to hold Musk accountable for his conduct. “This case ultimately is about whether the rules that apply to everyone else should also apply to Elon Musk,” he said. “Billionaires don’t get to operate under a different set of rules.”

Musk is still awaiting a judge’s ruling in a Delaware case in which investors are suing Tesla over his $55 billion compensation package.

Separately, Musk is also seeking to overturn his 2018 settlement with the U.S. Securities and Exchange Commission (SEC) over the tweet, under which Musk and Tesla paid $20 million each in penalties. Musk also agreed to step down as Tesla’s chair, to appoint additional independent directors, and to have drafts of his tweets material to Tesla shareholders reviewed by company lawyers before posting. Musk has said he was forced to agree to the settlement because of a funding crunch at Tesla, and claims the provisions infringe on his freedom of speech. He is appealing a U.S. district court’s refusal to overturn the settlement.

Tesla shares remain well above the buyout price Musk said he was considering on a split-adjusted basis despite losing nearly two-thirds of their value last year.