Elon Musk Favored in Far Reaching Securities Fraud Trial
Yesterday a jury voted in favor of Tesla CEO Elon Musk in a closely-watched Securities Fraud trial of Musk for a tweet about potentially taking the company private.
In August 2018, Musk tweeted that he was considering taking Tesla private at $420 per share and had “funding secured” at that price. The tweet was investigated by the Security Exchange Commission for potentially misleading investors, who promptly reacted to the statement, pushing the stock price to almost $380 before it settled at $352.
Yesterday, after weeks of hearings and testimonies, a jury voted in favor of Elon Musk and Tesla, clearing him of all charges and legal obligations. Additionally, the jury did not find Musk liable for a second count which accused him of making false or misleading statements in connection to the company’s private statements.
The ruling proved to be a major victory for Musk and Tesla shareholders, with Tesla’s share prices closing the day up 11%..
Not only the ruling in favor of Musk, it also reinforces the SEC’s role in monitoring and regulating corporate activities.
At the same time, investors must take the result of this case as a reminder of the importance and necessity of carefully separating fact from fiction during news/data analysis.
Below are key points to keep in mind:
• Always develop a thorough understanding of a company and its news before investing
• Develop financial forecasting techniques that account for potential external factors
• Pay close attention to analyst ratings, news and data
• Take care to consider whether a source has a bias or an incentive to report misleadingly A jury has cleared Tesla CEO Elon Musk of charges of securities fraud in a closely watched trial that had markets speculating on the outcome.
The jury of eight women and four men heard five days of testimony and deliberated for less than an hour before ruling in favor of Musk this past Friday. The dispute centered around Musk tweeting in August 2018 “funding secured” that he had secured the capital necessary to take Tesla private at a $420 a share price. The Securities and Exchange Commission had accused him of making false and misleading statements in breach of U.S. securities laws.
In a statement on Twitter, Musk thanked the jurors for their decision.
“Justice prevailed,” he wrote.
The victory supported the claim by Musk that he was acting on his honest beliefs about the company’s health, prospects, and ability to attain financing during the 2018 tweet controversy. On the other hand, the outcome may also raise further scrutiny from the SEC in the future.
The dispute between the SEC, which had sought to bar Musk from serving as an officer and director of a public company, and Musk, was the culmination of the fallout from that notorious tweet. The jury’s decision allows Tesla’s leader to remain as CEO and in control of one of the world’s most influential high-tech companies.
This news has been followed closely by technology industry stakeholders, as well as investors and Teslas’s large and devoted fan base. Ultimately, the jury’s decision signifies the value of a CEO who has leveraged his tech industry status to break new ground in innovation and disrupt business models.