A jury in San Francisco has ruled that Elon Musk misled investors during the uncertain period preceding his acquisition of Twitter, now known as X, for $44 billion in 2022. Although the jury found Musk liable for making misleading statements that impacted Twitter’s stock price, they cleared him of some fraud allegations, concluding he did not engage in a deliberate scheme to deceive investors.
The civil trial revolved around a class-action lawsuit initiated just before Musk’s takeover, focusing on whether tweets and remarks he made in May 2022 constituted intentional fraud against Twitter shareholders. The jury deliberated for four days before delivering their verdict, which concluded that Musk’s statements, particularly one in which he claimed the Twitter deal was “temporarily on hold,” were misrepresentations that misled investors. However, they did not find that Musk’s comments made during a podcast episode amounted to intentional deceit and absolved him of any coordinated effort to manipulate the stock price.
The jury awarded damages to shareholders ranging between approximately $3 and $8 per share, which the plaintiffs’ legal team estimates amounts to about $2.1 billion. Musk’s personal wealth, largely derived from his holdings in Tesla, is currently estimated at approximately $814 billion.
Joseph Cotchett, attorney for the plaintiffs, heralded the verdict as a significant victory for investors and a clear message that even powerful individuals must adhere to the law. Following the verdict, Musk’s legal team declined to comment.
Central to the trial was Musk’s contention regarding the number of fake accounts, or bots, on Twitter. During his testimony, Musk claimed that Twitter’s executives misrepresented the extent of these accounts, asserting that the real number was far higher than the 5% indicated in the company’s regulatory disclosures. He claimed this purported misrepresentation played a crucial role in his decision to attempt withdrawing from the purchase agreement.
The legal dispute escalated when Twitter sought court intervention to enforce the deal after Musk attempted to back out. Eventually, Musk reversed his stance and agreed to proceed with the acquisition at the originally negotiated price.
The jury’s deliberations included assessing whether Musk’s 2022 tweets, particularly one declaring that the acquisition was “on hold” while he sought further information on fake accounts, were crafted as part of an intentional strategy to undermine Twitter’s stock price. While they found that Musk misled investors with two of his tweets, they did not classify the podcast statement as misleading since it was presented as an opinion.
The trial featured testimony from key figures, including former Twitter executives and Musk himself, who spent more than a day on the witness stand. Musk’s narrative included assertions that Twitter had misled him regarding the number of bots, which he referred to disparagingly. He also argued that proceeding with the deal at the initial price ultimately benefitted Twitter shareholders.
However, during the acquisition process, Twitter’s stock price dipped below $33, representing a significant decline around 40% from the price Musk had initially agreed upon. Plaintiffs claimed that Musk’s statements resulted in considerable losses for those who sold their shares amidst this turmoil.
Musk’s legal team sought mistrials multiple times, arguing that the billionaire could not receive a fair trial in San Francisco due to perceived bias against him. This case marks a continuation of Musk’s legal battles related to his social media activity, following a previous case in which he was acquitted of wrongdoing in relation to proposed plans to acquire Tesla.
The jury’s findings underscore the importance of accountability in high-stakes corporate dealings and the role of social media in influencing market dynamics.
