Elon Musk Found Liable for Misleading Investors Over Twitter Stock

SAN FRANCISCO — A jury has found Elon Musk liable for misleading investors by driving down Twitter’s stock price in the months leading up to his $44 billion acquisition of the social media company, now known as X. However, the jury did not discover that Musk intentionally schemed to defraud investors.

The Civil Trial and Allegations

The civil trial in San Francisco centered on a class-action lawsuit filed before Musk took control of Twitter. Jurors were tasked with determining whether two tweets and comments Musk made on a podcast in May 2022 constituted intentional fraud against Twitter shareholders who sold their shares based on his statements.

Jury’s Verdict and Damages

After nearly four days of deliberation, the nine-person jury determined that Musk was liable for misleading investors with two tweets, including one stating the Twitter deal was “temporarily on hold.” They found he did not mislead investors with a statement made on a podcast and did not intentionally scheme to defraud investors. The jury awarded shareholders damages ranging from approximately $3 to $8 per stock per day, totaling around $2.1 billion, according to the plaintiffs’ lawyers.

“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 legal team did not comment after the verdict.

Focus on Bots and the Acquisition

Much of the trial focused on Musk’s claims regarding the number of bot accounts on Twitter. Musk testified that Twitter had a significantly higher proportion of fake and spam accounts than the 5% disclosed in regulatory filings, using this as justification for initially retreating from the purchase agreement.

After attempting to withdraw from the deal, Twitter pursued legal action in Delaware to compel Musk to honor the original agreement. Just before the trial was set to begin, Musk reversed course and agreed to proceed with the acquisition at the original price.

The Key Question: Intent to Deceive

The central issue was whether Musk’s tweets, including the one declaring the deal “temporarily on hold” while seeking information on bot accounts, were a deliberate attempt to depress Twitter’s share price. The jury found that while the tweets were misleading, they did not constitute a deliberate scheme.

The trial included testimony from former Twitter executives, including CEO Parag Agrawal and CFO Ned Segal, as well as Musk himself, who spent over a day on the stand.

Musk’s Testimony and Claims

Musk maintained that Twitter’s leadership misrepresented the number of bots on the platform and withheld information about how the figures were calculated. He repeatedly dismissed Twitter’s calculations as inaccurate.

Musk also argued that his eventual completion of the deal at the original price benefited most Twitter shareholders.

Shareholder Losses and Plaintiffs’ Arguments

Twitter’s share price fell below $33, approximately 40% below Musk’s initial offer, during the period of uncertainty surrounding the deal. This downturn resulted in losses for shareholders who sold their stock during that time.

Plaintiffs’ lawyer Mark Molumphy argued that Musk’s tweets were not accidental but were carefully calculated to drive down Twitter’s stock price, particularly as the cost of acquiring the company increased.

Previous Legal Battles

This is not the first time Musk has faced legal challenges related to his social media posts. Three years ago, he testified for about eight hours in a San Francisco federal trial concerning his 2018 plans to take Tesla private at $420 per share, a deal that ultimately did not materialize. In that case, a jury also found in his favor.