Elon Musk attends the annual meeting of the World Economic Forum in Davos, Switzerland, on Jan. 22.
Markus Schreiber/AP
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Markus Schreiber/AP
SAN FRANCISCO — A jury found Elon Musk responsible for misleading investors by intentionally lowering Twitter’s stock price during the period leading up to his $44 billion acquisition of the social media company in 2022. However, he was cleared of some fraud charges, as the jury determined he did not scheme to deceive investors.
The civil trial, held in San Francisco, revolved around a class-action lawsuit filed just before Musk assumed control of Twitter, later rebranded as X. Jurors deliberated on whether two tweets and Musk’s podcast comments in May 2022 amounted to intentional fraud against Twitter shareholders, leading them to sell their shares based on his statements.
After nearly four days of deliberation, the nine-member jury reached a verdict almost three weeks after the trial began on March 2. They concluded that Musk misled investors with two tweets, including one indicating the Twitter deal was “temporarily on hold,” but not with a podcast statement, which the jury deemed an opinion rather than a scheme to defraud investors.
Shareholders were awarded damages ranging from approximately $3 to $8 per stock per day, totaling around $2.1 billion, according to the plaintiffs’ lawyers. Musk’s fortune is estimated at approximately $814 billion, with much of it tied to Tesla shares.
“This is a significant victory for Twitter investors and the public markets,” said Joseph Cotchett, a plaintiffs’ attorney. “The jury’s verdict emphasizes that wealth and power do not exempt anyone from following the law.”
Musk’s legal team declined to comment as they left the courtroom.
The trial largely focused on Musk’s assertions about the number of bots on Twitter. He testified that Twitter had significantly more fake and spam accounts than the 5% disclosed in regulatory filings. Musk cited Twitter’s alleged misrepresentation of fake accounts as his reason for attempting to withdraw from the purchase.
When Musk attempted to back out, Twitter pursued legal action in Delaware to enforce the original agreement. Shortly before the case was set to go to trial, Musk reversed his decision and agreed to honor the initial deal.
Members of Elon Musk’s legal team, including attorney Michael Lifrak (left), exit the Phillip Burton Federal Building in San Francisco on March 4.
Dan Hernandez/San Francisco Chronicle/AP
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Dan Hernandez/San Francisco Chronicle/AP
The main issue in the case was whether Musk’s tweets on May 13, 2022, and statements about the number of fake Twitter accounts were intended to devalue the company’s stock. While the jury found Musk misled investors with two tweets, they determined his podcast remarks were opinions, not attempts to defraud. They also cleared him of scheming to lower the stock value.
The trial, which lasted nearly three weeks in San Francisco’s federal court for the Northern District of California, featured testimony from former Twitter executives, including CEO Parag Agrawal and CFO Ned Segal, along with Musk, who testified for more than a day.
During his testimony, Musk claimed Twitter’s leadership deceived him about the number of bots on the platform and withheld information on how fake accounts were calculated. He described the data provided by Twitter’s board with a vulgar abbreviation, emphasizing his disbelief in their claim that only 5% of accounts were bots.
Musk argued that sticking to the original deal price benefited most Twitter shareholders significantly. However, Twitter’s stock dropped below $33, nearly 40% less than Musk’s initial purchase offer, while the deal was in limbo. This decline affected shareholders who sold during the uncertainty caused by alleged deceitful conduct by Musk.
“I can’t control whether people sell their stock, but everyone who held the stock fared extremely well,” Musk stated.
The plaintiffs contended that as Tesla’s stock price fell, the Twitter acquisition became too costly for Musk, prompting him to tweet statements that devalued the stock to renegotiate a better deal or withdraw entirely.
Mark Molumphy, a lawyer for the plaintiffs, argued that Musk’s tweets were not accidental but strategically crafted to lower Twitter’s stock price. He urged jurors to hold Musk accountable and compensate investors who lost money due to the tweets, including one on May 13, 2022, stating the deal was “on hold.”
“He knew what he was doing,” Molumphy asserted.
Musk’s attorneys sought a mistrial several times, arguing that he could not receive a fair trial in San Francisco due to public animosity toward him.
This is not Musk’s first court appearance related to investor deception allegations via social media. Three years prior, he testified for about eight hours in a San Francisco federal trial regarding his plans to purchase Tesla for $420 per share in a proposed 2018 deal that never happened. A jury of nine members found Musk not guilty of wrongdoing in that case.
