Elon Musk and Tesla found not responsible in lawsuit over 'secured funding' tweet

Elon Musk has been found not liable in a securities fraud class action lawsuit centered on the Tesla CEO's now infamous "funding secured" tweet.

After less than 90 minutes of deliberation, a jury has announced the verdict of the trial that opened three weeks ago in San Francisco. The trial result sent Tesla shares up about 1.5% in after-hours trading to $189.98.

Musk tweeted Friday after the jury verdict: "Thank goodness the wisdom of the people prevailed! I deeply appreciate the jury's unanimous finding of innocence in the private Tesla 420 case."

The central issue in the lawsuit was whether Musk was liable for losses suffered by shareholders after he posted several Twitter posts in August 2018 indicating that he had secured funding to take Tesla private. Musk first tweeted "I'm considering taking Tesla $420 private. Funding secured. Another pair of tweets soon followed: 'Investor support confirmed. Only reason it's uncertain is c 'is that it depends on a shareholder vote', then another stating that he doesn't have a majority vote now and 'wouldn't expect any shareholder to have one if we went private'.

The plaintiffs' attorneys representing the investors argued that these shareholders suffered financially. Musk, Tesla and his board faced billions of dollars in damages.

The trial was not about whether these tweets were true. This question had already been answered. Edward M. Chen, the federal judge hearing the case, ruled that the tweets were false and that Musk was reckless to post them.

The three-week trial was largely a tug of war over language and intent.

Lawyer Nicholas Porritt, who presented plaintiffs' closing arguments, argued that when Musk posted the tweets, the company was far from reaching an agreement to go private, citing emails and SMS to prove there was no agreement or even a framework to reach one.

"For Elon Musk, if he believes it's just thinking about it, then it's true, no matter how objectively false or exaggerated it may be," Porritt said. “It can work in his businesses. This is not a problem for this lawsuit. But that doesn't work in stock markets or public companies. Stock markets have rules governing what you can and cannot say. And one of those basic rules is that what you say must be true and accurate."

Alex Spiro, who represented Musk, countered, saying throughout his closing arguments that funding was not the issue at all and Musk knew he could reach it if needed. Instead, Spiro pointed to a blog post several weeks after Musk's tweets explaining that Musk wouldn't take Tesla private because existing shareholders thought it was better for it to be a publicly traded company.

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While Musk avoided a hefty damages bill, the funding tweet cost him dearly.

The U.S. Securities and Exchange Commission filed a lawsuit in September 2018, alleging Musk lied when he tweeted that he had "secured funding" for a private takeover of the 420 company. $ per share. The lawsuit was filed after Musk and Tesla's board of directors abruptly walked away from a deal with the SEC. Not only did the board back out of the deal, it also issued a bold statement of support for Musk after the charges were filed.

An agreement was finally reached despite everything, but with more severe sanctions than the initial agreement. Musk agreed, in the September 29 settlement, to resign as Tesla chairman and pay a $20 million fine. Tesla agreed to pay a separate fine of $20 million.