Thursday 18 / April / 2024
Washington: A US jury on Friday decided that Tesla CEO Elon Musk was "not liable" for the losses incurred by investors after he tweeted that he was thinking to take the company private and added "funding secured," New York Times reported.
In August 2018, Musk tweeted, "Am considering taking Tesla private at USD 420. Funding secured." "Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote," he added in the tweet.
After this tweet, investors sued Musk, Tesla, and the company board, arguing that the CEO of Twitter's statement regarding the embryonic plan to take the electric car company private had devastating financial consequences for them.
But in a federal civil trial over the last three weeks, lawyers for Tesla and Mr. Musk, the car company's chief executive, have argued that he was such a successful businessman that he could have easily obtained financing to take Tesla private, as per the report in New York Times.
Tesla shares initially climbed 11 per cent on the day off on his original tweet, but they never reached that promised USD 420 level, reaching a high that day of USD 387.46.
And they soon fell well below their pre-tweet price of USD 344, hitting USD 263.24 a month later, as it became clear that the funding was less than secure, prompting the shareholder suit that is just now reaching trial after more than four years, reported CNN.
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 initially 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 USD 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, according to CNN.
Musk later said he only agreed to the settlement because continuing to fight would have resulted in banks cutting off the funding that Tesla needed to survive, which was then losing money and facing a cash crunch. In comments at a TED conference last year he compared the negotiations with the SEC as compared to someone pointing a gun to his child's head.
Meanwhile, in this case, the federal judge, currently, Edward M. Chen, had already ruled that "funding secured" and Musk's second statement was untrue, and that Tesla CEO was reckless when posting them.
The jurors -- seven men and two women -- deliberated for about an hour, finding that Musk's statements did not cause the investors' losses. The verdict allows Musk to claim vindication for a dark period in his professional life when Tesla was struggling to increase production of its most affordable car, the Model 3, New York Times repoted.
But if the verdict wouldn't come in his favor then Musk and Tesla had to pay the heavy price like billions of dollars for the damage. "The jury got it right," Alex Spiro, a lawyer for Musk and Tesla, said after the verdict was read, adding, "That's all I'm going to say."
Throughout the trial, the investors' lawyers had argued that Musk knew Tesla was nowhere near going private because no individuals and investment funds had committed specific amounts of money to the deal. There was also neither a definitive structure for a private Tesla nor a clear path to regulatory approval for the plan, New York Times quoted lawyers as saying.
