Gary Zhou 
- ⚖️ U.S. appeals court cleared Elon Musk and Tesla of liability over the 2018 “funding secured” tweet.
- 💸 The tweet led to TSLA stock volatility and resulted in Musk and Tesla paying a $40 billion fine.
- 👥 The lawsuit was filed by TSLA shareholders, claiming the tweet misled investors, causing financial losses.
- 📜 In 2023, a jury sided with Musk and Tesla, rejecting shareholders’ claims.
- 🔍 A subsequent appeal argued flawed jury instructions but was ultimately dismissed by the 9th U.S. Circuit Court of Appeals.
- 🚀 The court noted the tweet might have been reckless, but the decision depended on whether Musk knowingly misled investors.
- 🧑⚖️ The court’s decision clarified the need for knowledge proof in apportioning liability for damages.
In recent years, the courtroom dramas involving high-profile individuals and corporations have become as captivating as any television legal thriller. One such drama unfolded around Elon Musk, Tesla, and the infamous 2018 “funding secured” tweet. Let’s delve into the intricate layers of this legal case, the implications for stakeholders, and what the final verdict means for the world’s leading electric car manufacturer and its investors.
The Background: The Tweet That Shook the Market
In 2018, Elon Musk tweeted about having “funding secured” to take Tesla private at $420 per share. This announcement immediately caused a whirlwind of activity in the stock market, leading to significant volatility for Tesla’s stock (TSLA). Ultimately, Musk and Tesla paid a hefty fine, a combined $40 billion, but the controversy did not end there.
The Lawsuit: Shareholders vs. Musk and Tesla
Shareholder Allegations
The tweet drew the ire of TSLA shareholders, who claimed it misled them into making financial decisions based on false presumptions. Led by investor Glen Littleton, the lawsuit alleged that the misleading information resulted in substantial financial losses.
The Jury’s Decision and Subsequent Appeal
In a 2023 trial, a jury sided with Musk and Tesla, effectively clearing them of the shareholders’ claims. However, this decision was not the end of the legal saga. Littleton’s legal team pursued an appeal, arguing that the jury instructions had been flawed. They contested that the jury was not properly guided on whether Musk acted with intent or knowledge of the misinformation.
The 9th Circuit Court of Appeals: Final Ruling
The appeal brought the case under the review of the San Francisco-based 9th U.S. Circuit Court of Appeals. After careful consideration, the court rejected the appeal, upholding the original jury verdict. The court acknowledged that while the 2018 tweet might have been reckless, the question of whether Musk knowingly misled investors was crucial to the case.
Clarifying Recklessness and Scienter
- Recklessness: The court identified that Musk’s actions were reckless, meaning they lacked due consideration of the potential market tumult the tweet would cause.
- Scienter and Knowledge Proof: The court’s decision emphasized the importance of demonstrating knowledge or intent—scienter—in securities fraud cases. The jury did not need to consider Musk’s knowledge to determine recklessness but would have to if the question of apportioned liability arose.
Implications for Stakeholders
Impact on Tesla Shareholders
- Short-term Volatility: The immediate effect of the tweet was increased stock volatility, which benefited some stock traders at the expense of others.
- Long-term Stability: The court’s decision has provided a certain degree of closure, potentially stabilizing investor sentiment moving forward.
Lessons for Corporate Communication
For corporations and high-profile executives, this case underscores the importance of carefully considering the impact of public communications. The line between market information and misinformation can have substantial legal and financial consequences.
Conclusion: Moving Beyond the Courtroom
While Elon Musk’s “funding secured” tweet will likely be dissected in business and legal circles for years to come, the recent court decision provides a form of closure. As the dust settles, investors and stakeholders can look to the future of Tesla with the reassurance that even amidst controversy, the judicial system has rendered its verdict—clearing Musk and Tesla of liability and leaving profound lessons in its wake.
