The US 9th Circuit Court of Appeals has upheld a jury verdict that clears Tesla and CEO Elon Musk of misleading investors over Musk’s notorious 2018 tweet claiming “funding secured” for taking Tesla private.
This case originated from Musk’s public post on Twitter (now X) that he had a funding commitment to take Tesla (TSLA) private at $420 per share. The Securities and Exchange Commission (SEC) charged Musk with securities fraud, alleging that his statements were false and misleading. In September 2018, Musk and Tesla settled with the SEC without admitting wrongdoing.
With Musk’s tweet sparking volatility in the company’s stock price, shareholders argued they were misled into believing the privatization deal was imminent, only for the stock to drop sharply once the deal proved to be elusive. A class-action lawsuit was filed claiming that Musk’s tweets misled them, causing financial losses.
In February 2023, a jury found Musk and Tesla not liable for investor losses, concluding that the plaintiffs failed to prove that Musk’s statements harmed them.
The investors sought a new trial however, claiming that US District Judge Edward Chen’s jury instructions required them to prove Musk knowingly made false statements, even though the judge had previously ruled Musk’s statements were reckless. However, in a ruling on Wednesday, the appellate court affirmed that while Musk’s statements were indeed reckless, the question of intentional deception was key for the jury to consider any damages. (via Reuters)
This interpretation meant the original jury instruction held up under legal scrutiny, leaving investors without a new trial, officially ending this case.
