Elon Musk on Friday proved once again that he is difficult to beat in court, when a federal jury in San Francisco took just two hours to clear the Tesla Inc CEO of claims by investors that he defrauded them when he wrote on Twitter four-and-a-half years ago that he was considering taking the company private and had “funding secured” to make the deal happen.
The outcome marked another victory for the billionaire’s go-to lawyer, Alex Spiro, in a risky trial that many high-profile executives would have avoided by reaching an out-of-court settlement.
Friday’s verdict after a three-week trial in which Musk was the star witness shows that the entrepreneur once dubbed “Teflon” Elon for his ability to escape unscathed from legal scraps is still on a roll.
Photo: EPA-EFE
The outcome is a bitter loss for the shareholders who sought to recoup trading losses from fluctuations in Tesla shares after Musk posted the messages. Musk abandoned the take-private plan about two weeks after his initial tweets.
It is an especially poignant vindication for Musk after his August 2018 tweets got him and Tesla sued by the US Securities and Exchange Commission and he reluctantly agreed to accept restrictions on his social media posts.
“The jury got it right,” Spiro said after the verdict, declining to comment further.
Nicholas Porritt, a lawyer for the investors, said: “We are disappointed with result and considering our next steps.”
For Musk himself, who has a long and controversial record of tweeting whatever comes into his head about business, politics and culture, the outcome of the trial might not matter much because even a loss is unlikely to make him change his ways.
The verdict is not likely to become a precedent that spurs more free-wheeling corporate disclosures on social media, University of Michigan Law School professor Adam Pritchard said.
That is because other CEOs would continue to use conventional methods to communicate about company business, he said.
“Nobody does this — only Elon does this,” Pritchard said before the verdict. “He’s incorrigible.”
Although many executives testified, the trial was all about Musk.
Musk’s defense asked jurors to imagine a world through the entrepreneur’s eyes, in which a US$60 billion deal to take Tesla private could be done on a handshake.
The jury learned of his relationship with Saudi Arabian Public Investment Fund Governor Yasir al-Rumayyan, and a 2017 dinner with him joined by Softbank CEO Masayoshi Son, where taking Tesla private was discussed.
Musk testified that the “funding secured” tweet was “absolutely truthful,” touting what he described as an “unequivocal” commitment by Saudi Arabia even though he had nothing in writing.
He said he felt compelled to reveal that he was considering taking Tesla private because earlier that day, the Financial Times reported that Saudi Arabia was building a sizable stake in Tesla.
He said that he was afraid his going-private plans might also be leaked, and that he wanted to put all Tesla investors on equal footing by broadcasting his plans on Twitter.
Musk also said that if required, he could have divested his ownership stake in Space Exploration Technologies Corp to fund the deal.
In the end, the billionaire prevailed despite evidence showing that Musk’s bankers had been barely consulted and had not formally signed on to his take-private plan.
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