Lessons so far from Elon Musk’s tweet trial

Elon Musk is on trial in San Francisco — the Tesla CEO is accused of defrauding investors who say they lost money when he sent out a Tweet saying he’s “considering” taking Tesla off the public stock market at $420 a share with “funding secured.”

Musk previously paid a fine for the tweet, but the suit at the center of the trial is a class action, meaning he will have to respond to its parties separately from the government. Perhaps one of the salient lessons of the trial has already been revealed in its early days — Musk has defended his tweet by saying, in effect, that people shouldn’t have automatically believed him based off of a tweet.

“The best advice [Musk] has ever given us: don’t believe everything I say,” said Erik Gordon, a lawyer and professor at the University of Michigan’s Ross School of Business, in an interview with Marketplace’s David Brancaccio. “That could be one of the lessons of this case — don’t rely on anything unless it’s got that official SEC thing and the SEC can come after you.”

The following is an edited transcript of their conversation.

David Brancaccio: Alright, so what do you make of this? What are the key issues here?

Erik Gordon: You know, there are a couple of key issues. I mean, one issue ultimately is whether anybody should believe Musk when he tweets. In the trial, the key issue for Musk is not going to be whether it was false or misleading because the judges said that tweet is false or misleading. The key issue is going to be “did the plaintiffs lose their money because of that tweet?” And here’s the clever thing Musk has come up with. He says, well maybe the stock price didn’t go up because I said, “Funding is secured.” Maybe the stock price went up because I said, “I’m considering taking it private.” And even if funding secured as false and misleading, I was considering taking it private. So I get off because well, the stock price didn’t go up because of “funding secured.”

Brancaccio: By the way, Musk now testifies that he really did have the funding to take Tesla private, he just didn’t do that in the end. Now, another interesting phrase we heard from Mr. Musk is that there are limitations to communicating on Twitter because of the short-form nature of what is a tweet. He said you can be truthful, but you can’t be comprehensive in that format. But here’s another Musk quote, “Just because I tweet something does not mean people believe it or act accordingly.” That’s kind of like the irony defense. Maybe I’m saying one thing, but I mean something else and it’s up to people to not listen to me.

Gordon: You know, and maybe that’s the best advice he’s ever given us: don’t believe everything I say. You can’t say a lot on Twitter. But you could say funding almost secured. That would have fit into a Tweet.

Brancaccio: Right. But I mean, is this a world where we’re not accountable for anything we say when we are at the helm of a public company, unless it’s in an official government filing stamped by the official corporate secretary, and, you know, logged in at the government regulator’s office?

Gordon: Boy, that could be one of the lessons of this case: don’t rely on anything, unless it’s got that official SEC thing and the SEC can come after you. Which of course, they already have come after him to the tune of $20 million. But maybe we just can’t count on the legal system to protect us against the ordinary kinds of things we think the legal system should protect us against.

Brancaccio: And stepping back from this case, when you think about it, Erik, going forward, now should any investor pay attention to anything that Elon Musk says if it’s not in some very official forum?

Gordon: I’m going to take everything he says with a salt shaker full of salt. But in future cases, Musk might have a really terrific defense. He might be able to say, look, it’s not reasonable for anybody to rely on anything I say. Pretty clever.