A California jury has ruled that Elon Musk is not liable for losses experienced by Tesla shareholders following his controversial “funding secured” tweet from 2018.
The unanimous verdict, announced Friday in US District Court, ends a three-week long trial over a class-action shareholder lawsuit regarding the tweet, in which the billionaire said that he was thinking about taking Tesla private for $420 a share and had “funding secured.” Those two words resulted in the CEO having to forfeit his position as Tesla’s executive chairman and pay millions of dollars in fines and legal fees.
Musk had spoken to executives of the Saudi sovereign wealth fund about the funding he would need to take Tesla private. However, it was anything but “secured.”
The plaintiffs — several Tesla shareholders who alleged that they lost significant portions of their investments in the wake of the share price volatility following the tweet — were seeking monetary damages from Musk, Tesla and other Tesla directors in their lawsuit.
However, the jury ruled that plaintiffs failed to prove any of their four claims against Musk and the other defendants.
“Thank goodness, the wisdom of the people has prevailed!” Musk tweeted after the verdict was announced. “I am deeply appreciative of the jury’s unanimous finding.”
Nicholas Porritt, a lawyer representing the Tesla shareholders, told CNN: “We are disappointed with the verdict and examining next steps.”
Tesla (TSLA) shares initially climbed 11% on the day of Musk’s original “funding secured” tweet, but they never reached that promised $420 level, reaching a high that day of $387.46. And they soon fell well below their pre-tweet price of $344, hitting $263.24 a month later, as it became clear that the funding was less than secure. That prompted the shareholder suit that is just now reaching trial after more than four years.
A turn from losses to profits about a year after the tweet started Tesla shares on an extraordinary run, gaining 1520% from the day of the tweet to its record high in November 2021. That record close of $409.97 works out to $6,150 a share, when adjusted for the two stock splits since that day. Even with the 70% decline in Tesla shares from that all-time high to Friday’s close, shares are still up 384% since the close on the day of the 2018 tweet.
Musk’s tweet also prompted a civil suit by the Securities and Exchange Commission, the federal agency charged with protecting investors by requiring executives to tell the truth. It originally sought to strip him of his position as Tesla’s CEO. It eventually reached a settlement with Musk in which he and Tesla each agreed to pay $20 million in fines, and Musk gave up his title as chairman of the company but retained the CEO title. It also required that any tweet he sent out with material information about Tesla be reviewed in advance by other company executives.
The lead plaintiff in the shareholder lawsuit, Glen Littleton, testified last month that he lost more than 75% of his investments following Musk’s “funding secured” tweet.
“I wanted to ensure my livelihood. This represented a threat to my livelihood,” he said of Tesla not, in fact, being taken private for $420 per share.
Musk in his testimony, however, argued that his tweets do not cause Tesla’s stock price to move higher or lower.
“The causal relationship is clearly not there simply because of a tweet,” Musk said.
Musk also argued that the character constraint of Twitter made it difficult to be as verbose as one might be in a formal financial filing, which are detailed, subject to regulations and vetted by financial disclosure experts.
- Matt McFarland contributed to this report