Musk lied to investors in Twitter deal, jury drops fraud charges
A jury has determined that Elon Musk is liable for misleading investors by intentionally lowering Twitter’s stock price during the chaotic period preceding his 2022 acquisition of the social media company for $44 billion. However, it cleared him of certain fraud allegations, determining that he did not “scheme” to mislead investors. The civil trial in San Francisco focused on a class-action lawsuit that was filed shortly before Musk assumed control of Twitter, which he subsequently renamed X. Jurors were tasked with determining whether two tweets and remarks Musk made during a podcast in May 2022 constituted intentional fraud against Twitter shareholders, who sold their shares influenced by Musk’s statements.
The nine-member jury reached its verdict following three days of careful deliberation, nearly three weeks after the trial commenced on March 2. They stated that although Musk was accountable for misleading investors through two tweets — one of which indicated that the Twitter deal was “temporarily on hold,” he was not found liable for a statement made during a podcast and did not intentionally “scheme” to defraud investors. As this is a class action case, the specific amount in damages that Musk may be required to pay to thousands of shareholders, including numerous institutional investors, remains uncertain; however, it is expected to be in the billions. The jury awarded shareholders between approximately $3 and $8 per stock per day. Musk’s fortune is currently estimated at around $814 billion, with a significant portion of it linked to Tesla shares.
The trial predominantly centered around Musk’s assertions regarding the quantity of bots present on Twitter. Musk testified that Twitter had a significantly higher number of fake and spam accounts than the 5 percent it disclosed in regulatory filings. He cited what he referred to as Twitter’s misrepresentation of the number of fake accounts on its service as a justification for his decision to withdraw from the purchase. Following Musk’s attempt to withdraw, Twitter initiated legal proceedings in Delaware to compel him to fulfill his initial agreement. Just prior to the trial’s commencement, Musk altered his stance once more and consented to fulfill the payment he had initially pledged.
