A jury has found Elon Musk liable for misleading investors by deliberately driving down Twitter’s stock price in the tumultuous months leading up to his 2022 acquisition.
A jury has found Elon Musk liable for misleading investors by deliberately driving down Twitter’s stock price in the tumultuous months leading up to his 2022 acquisition of the social media company for $44 billion. But it absolved him of some fraud allegations, finding that he did not “scheme” to mislead investors.
The civil trial in San Francisco centered on a class-action lawsuit filed just before Musk took control of Twitter, which he later renamed X. Jurors were asked to decide if two tweets and comments Musk made on a podcast in May 2022 amounted to him intentionally defrauding Twitter shareholders, who sold their shares based on Musk’s statements.
The nine-person jury returned the verdict after nearly four days of deliberation, nearly three weeks after the trial began on March 2. They said that while Musk was liable for misleading investors with two tweets — including one said the Twitter deal was “temporarily on hold,” he did not do so with a statement he made on a podcast and that he did not intentionally “scheme” to defraud investors.
The jury awarded shareholders between about $3 and $8 per stock per day as damages, which the plaintiffs’ lawyers said amounts to about $2.1 billion. Musk’s fortune is currently estimated at about $814 billion, much of it tied up in Tesla shares.
“It’s an important victory, not just for investors of Twitter, but for the public markets,” said Joseph Cotchett, an attorney for the plaintiffs. “I think the jury’s verdict sends a strong message that just because you’re a rich and powerful person, you still have to obey the law, and no man is above the law.”
Musk’s lawyers said they had no comment as they walked out of the courtroom.
Much of the trial focused on Musk’s claims about the number of bots on Twitter. Musk testified that Twitter had a much higher number of fake and spam accounts than the 5% it disclosed in regulatory filings. He used what he called Twitter’s misrepresentation of the number of fake accounts on its service as a reason to retreat from the purchase.
After Musk tried to back out, Twitter went to court in Delaware to force him to honor his original deal. Just before that case was scheduled to go to trial, Musk reversed course again and agreed to pay what he had originally promised.
The central question of the case was whether Musk sent out tweets — including one on May 13, 2022, that said the Twitter deal was “temporarily on hold” while he sought information on the number of fake accounts on the service — as a deliberate scheme to tank Twitter’s shares. The jury found that while Musk did mislead investors with two tweets, he did not do so with a statement he made on a podcast because it was an opinion. The jurors also absolved him of scheming to drive down the stock.
The nearly three-week trial in San Francisco federal court for the Northern District of California saw testimony from former Twitter executives including CEO Parag Agrawal and CFO Ned Segal, as well as Musk, who was on the stand for more than a day.
In his testimony, Musk maintained that Twitter’s leadership lied about the amount of bots on the platform and withheld information from him about how the number of fake accounts was calculated. He repeatedly described the information that Twitter’s board provided with an abbreviation for a bull’s scatology. “I did make it clear that I thought it was BS,” Musk said of Twitter’s calculations asserting that only about 5% of its accounts were bots.
Musk also asserted that his decision to follow through on the deal at the original sales price provided a huge windfall for most Twitter shareholders.
But Twitter’s shares fell below $33, or about 40% below Musk’s original purchase price, while the deal was hanging in limbo. That downturn cost shareholders who sold their stock during the uncertainty caused by what the lawsuit alleges was Musk’s deceitful behavior.
“I can’t control whether people sell their stock, but everyone who held the stock fared extremely well,” Musk said.
The plaintiffs argued that, as Tesla’s stock price declined and buying Twitter became too expensive for Musk, he tweeted statements that drove down the stock price in the hopes he could renegotiate the deal for a lower price or get out of it altogether.
Musk’s tweets, the plaintiffs’ lawyer argued, were not some “innocent mistake” or a “stupid tweet” off the top of his head, but carefully calculated to drive down’s Twitter’s stock price.
In closing arguments, Mark Molumphy, a lawyer for the plaintiffs, asked jurors to hold Musk accountable and compensate thousands of investors who lost money because of tweets Musk sent, including one from May 13, 2022, that said the deal was “on hold.”
“He knew what he was doing,” Molumphy said.
Musk’s lawyers motioned for a mistrial several times during the contentious trial, contending that the billionaire Tesla CEO can’t get a fair trial in San Francisco because of animosity toward him from the public.
This isn’t the first time that Musk has been dragged into court to defend himself against allegations of duping investors with his social media posts. Three years ago, Musk spent about eight hours testifying in a San Francisco federal trial about his plans to buy Tesla — the electric automaker that he still runs as a publicly traded company — for $420 per share in a proposed 2018 deal that never materialized. A nine-member jury absolved Musk of wrongdoing in that case.
