Elon Musk Found to Have Misled Twitter Investors During Takeover

A California jury has determined that Elon Musk misled investors regarding the number of bot accounts on Twitter (now X) prior to his $44 billion acquisition of the social media platform in 2022. While the jury did not find evidence of a deliberate scheme to defraud investors, they concluded that Musk’s statements were materially false and misleading, impacting the stock price.

Key Findings of the Jury

The verdict, reached in a San Francisco federal court, centers on Musk’s public questioning of Twitter’s reported bot numbers after he initially agreed to purchase the company in April 2022. Shareholders argued that Musk falsely claimed Twitter underreported the prevalence of fake and spam accounts, potentially by a significant margin – suggesting as much as 20% compared to the company’s disclosed 5% .

Specifically, the jury focused on tweets made by Musk in May 2022, where he stated his takeover “cannot go forward” until Twitter’s CEO could prove the bot percentage was less than 5% . Shareholders’ lawyer, Mark Molumphy, argued that Musk “trashed the company” and “tanked the stock” with these statements .

Legal Implications and Reactions

The class action lawsuit, Pampena v. Musk, was filed in October 2022. Monte Mann, a trial lawyer at Armstrong Teasdale, noted that the verdict “sends a clear message — if you move the market with your words, you own the consequences,” and anticipates a “chilling effect” on how executives and dealmakers approach public statements .

Musk’s legal team at Quinn Emanuel Urquhart & Sullivan intends to appeal the verdict, viewing it as “a bump in the road” . Musk completed the acquisition of Twitter in October 2022 and subsequently renamed it X, integrating it into his SpaceX company .

Broader Context

This case highlights the potential legal ramifications of public statements made by CEOs and company leaders, particularly during significant transactions like mergers and acquisitions. The jury’s decision underscores the importance of accurate and transparent communication with investors . The outcome may influence future litigation involving similar claims of market manipulation through public statements.