Following his contentious “funding secured” tweet from 2018, a California jury has decided that Elon Musk is not responsible for losses suffered by Tesla shareholders.
The US District Court’s three-week trial over a class-action shareholder lawsuit involving the tweet in which the billionaire said he was considering taking Tesla private for $420 per share and had “funding secured” comes to an end with the unanimous decision, which was announced on Friday.
Due to those two words, the CEO had to resign from his role as executive chairman of Tesla and pay millions of dollars in fines and legal costs.
Musk had discussed the funding required to take Tesla private with Saudi Arabia’s sovereign wealth fund officials. It was, however, anything but “secured.”
In their lawsuit against Musk, Tesla, and other Tesla directors, the plaintiffs, a number of Tesla shareholders, claimed that they had lost a sizeable portion of their investments as a result of the share price volatility that followed the tweet.
The jury concluded that the plaintiffs’ four claims against Musk and the other defendants were all unfounded.
It’s a relief that the people’s wisdom won out. After the judgment was rendered, Musk tweeted. “I sincerely appreciate the jury’s unanimous decision,” Musk’s initial “funding secured” tweet caused Tesla (TSLA) shares to rise 11% that day, but they never reached the promised $420 level, peaking at $387.46 instead.
As it became clear that the funding was less than certain, they quickly dropped well below their pre-tweet price of $344, reaching $263.24 a month later. That led to the shareholder lawsuit, which has taken more than four years to finally get to trial.
Tesla shares went on a remarkable run, rising 1520% from the day of the tweet to its record high in November 2021, as a result of a change from losses to profits about a year after the tweet. When the two stock splits since that day are taken into account, that record close of $409.97 works out to $6,150 per share.
Tesla stock is still up 384% since the close on the day of the 2018 tweet, despite the 70% decline from its all-time high to Friday’s close. Musk’s tweet also prompted the Securities and Exchange Commission, a federal body tasked with safeguarding investors by requiring executives to tell the truth, to file a civil lawsuit.
At first, it aimed to have him removed as CEO of Tesla. In the end, it reached a settlement with Musk in which he and Tesla both consented to pay $20 million in penalties, Musk renounced his position as chairman of the company but kept his CEO title. Additionally, it mandated that other company executives review any tweet he sent out that contained crucial information about Tesla beforehand.
In his testimony last month, Glen Littleton, the primary plaintiff in the shareholder lawsuit, claimed that Musk’s “funding secured” tweet caused him to lose more than 75% of his investments.
“I needed to make sure I had money. When Tesla wasn’t actually taken private for $420 per share, he said, “This represented a threat to my way of life. Musk, however, asserted in his testimony that his tweets do not affect the direction of Tesla’s stock price.
Simply because of a tweet, there is clearly no causal relationship, according to Musk.
Musk further contended that Twitter’s character limitations made it challenging to use as many words as one might in a formal financial filing, which are thorough, subject to rules, and reviewed by experts in financial disclosure.
