A US federal jury on Friday found Elon Musk liable for misleading Twitter shareholders by deliberately trying to drive down its stock price in the months leading up to his 2022 acquisition of the social media company for $44 billion (€38 billion). But it absolved him of some fraud allegations, finding that he did not “scheme” to mislead investors.
The verdict from a jury in San Francisco federal court came in a closely watched civil trial.
What was the case about?
Musk, considered the wealthiest person in the world, agreed to buy Twitter in April 2022. Not long afterward he made public statements questioning whether the platform was overrun with fake and spam accounts (bots). He posted a tweet saying his purchase was “temporarily on hold” pending confirmation that bots represented less than 5% of users. In another tweet he said the percentage could be “much” higher than 20% and that the takeover could not proceed unless Twitter’s CEO proved the share was under 5%.
Musk tried to back out of the purchase, prompting Twitter to sue in Delaware to force him to honor the deal. Just before that case was scheduled to go to trial, Musk reversed course and agreed to pay what he had originally promised. He completed his purchase in October 2022 and later renamed the company X.
What did the jury say?
Twitter shareholders filed a class-action lawsuit claiming they sold shares based on Musk’s statements. A nine-person jury was asked to decide if two tweets and comments Musk made on a podcast in May 2022 amounted to intentional fraud that caused investors to sell.
The nearly three-week trial, which began on March 2, included testimony from former Twitter executives, including CEO Parag Agrawal and CFO Ned Segal, as well as Musk. Musk testified that Twitter’s leadership lied about the number of bots and withheld information about how bot counts were calculated.
The jurors found that Musk violated a securities rule that bars false and misleading statements that artificially drive down a stock price — in this case Twitter’s — according to the verdict form. However, they concluded the shareholders did not prove that Musk engaged in a scheme to defraud them.
Will Musk appeal the ruling?
The lawsuit covers investors who claimed they sold Twitter shares at prices Musk artificially depressed between May 13 and October 4, 2022. The jury awarded shareholders between about $3 and $8 per stock per day as damages, which plaintiffs’ lawyers estimate could total about $2.5 billion.
Joseph Cotchett, an attorney for the plaintiffs, called the decision “an important victory, not just for investors of Twitter, but for the public markets,” saying it “sends a strong message” that “no man is above the law.”
Musk’s lawyers at Quinn Emanuel Urquhart & Sullivan described the verdict as “a bump in the road” and said they “look forward to vindication on appeal.”
Edited by: Karl Sexton