Reported by Angela Berkowitz, Brendan Blake, Benjamin Halper, Jennifer Burns Luz, Jonathan Shapiro, and Marco Wong

On February 3, 2023, in the matter In re Tesla Inc. Securities Litigation, Case No. 3:18-cv-04865, a California federal jury cleared Tesla, Inc. (Tesla), and CEO Elon Musk of claims that they committed securities fraud, causing investors to suffer losses of $12 billion. The complaint alleged that the defendants violated the Securities Exchange Act when, after meeting with representatives of Saudi Arabia’s Public Investment Fund, Musk tweeted the following message to more than 22 million followers: “Am considering taking Tesla private at $420. Funding secured.” The complaint alleged that this and other related statements were false and misleading because, in fact, no concrete financing was in place at the time of Musk’s tweets.

At issue during the trial was whether Musk’s tweets were material to the plaintiffs’ investment decisions and led to their financial losses. Counsel for Tesla and Musk attributed the decline in Tesla’s stock price to an interview in which Musk explained that the demands of the company were affecting his health. Other highlights during the trial included testimony by Musk that he considered a verbal pact and a handshake with the managing director of Saudi Arabia’s Public Investment Fund to be akin to “a done deal,” and that he thought he “was doing the right thing” by attempting to keep shareholders informed, as well as testimony by former 21st Century Fox CEO James Murdoch that he was not surprised at Musk’s confidence in the handshake deal because such agreements aligned with Murdoch’s own Mideast experience.

The case serves as an example of how social media can influence public markets and can give rise to potential liability under the securities laws, and is a high-profile example of something that doesn’t happen often: securities claims being decided by a jury.

Read full report: https://www.jdsupra.com/legalnews/jury-acquits-tesla-and-musk-of-2718673/