Elon Musk Found Liable for Misleading Twitter Shareholders

A California jury has found Elon Musk liable for misleading Twitter shareholders prior to his $44 billion acquisition of the social media platform in 2022. The verdict, reached on Friday, could result in damages of up to $2.6 billion [Deadline].

The Case and the Verdict

The class-action lawsuit, Pampena v. Musk, centered around a tweet posted by Musk in May 2022 stating the deal to acquire Twitter was “temporarily on hold.” [Deadline] Jurors determined this statement was harmful and misleading, causing Twitter’s share price to fall nearly 10% in a single session. [Deadline]

Although the jury unanimously agreed that Musk’s tweet was misleading, they did not find that he specifically engaged in a scheme to defraud investors. [Deadline]

Shareholder Claims and Potential Damages

Former shareholders argued that Musk’s hesitation was a tactic to pressure Twitter into lowering the acquisition price. [Deadline] The plaintiffs, representing investors who sold their shares between May and October 2022, claimed they missed out on the final acquisition price of $54.20 per share when Musk ultimately completed the purchase and rebranded the platform as X. [Barron’s]

Attorney Joseph Cotchett, representing the former shareholders, emphasized the case’s importance for average investors, including those with 401ks, pension funds, and those working in essential services. [Deadline]

Musk’s Response and Potential Appeal

Musk’s legal team has stated they view the verdict as a “bump in the road” and intend to appeal the decision. [Deadline] The same day as this ruling, a Texas court cleared Musk in a separate defamation case, a fact highlighted by his lawyers. [Deadline]

This legal defeat is considered rare for Musk, who has often been referred to as “Teflon Elon” due to his history of successfully navigating lawsuits. [Deadline]

Background of the Acquisition

Musk initially agreed to acquire Twitter in April 2022 for $54.20 per share but spent months attempting to withdraw from the deal before ultimately completing the acquisition in late October 2022. [CNN] He subsequently merged the platform with his artificial intelligence startup, xAI, and his space exploration company, SpaceX. [CNN]