A jury’s decision has held Elon Musk accountable for deceiving investors by deliberately causing a drop in Twitter’s stock price before his acquisition of the platform for $44 billion in 2022. However, the jury cleared him of certain fraud accusations, stating that he did not engage in a scheme to deceive investors.
The trial, which took place in San Francisco, revolved around a class-action lawsuit filed just prior to Musk taking over Twitter, which he later rebranded as X. The jury was tasked with determining if Musk’s two tweets and comments made during a podcast in May 2022 constituted intentional fraud against Twitter shareholders who sold their shares based on his statements.
After almost four days of deliberation following the trial that commenced on March 2, the nine-person jury rendered its verdict. They found Musk liable for misleading investors with two tweets, one of which suggested the Twitter deal was “temporarily on hold,” but they did not find evidence of intentional deceit in a statement made on a podcast or a scheme to defraud investors.
As part of the verdict, shareholders were awarded damages ranging from about $3 to $8 per stock per day, totaling approximately $2.1 billion in stock and an additional $500 million in options. Musk’s current wealth is estimated at around $814 billion, with a significant portion tied up in Tesla shares.
Joseph Cotchett, an attorney representing the plaintiffs, emphasized the significance of the jury’s decision, stating that it not only benefits Twitter investors but also upholds integrity in public markets. He highlighted that the verdict underscores the principle that adherence to the law is essential for all individuals, regardless of their wealth or influence.
Musk’s legal team, from Quinn Emanuel Urquhart & Sullivan, mentioned their intention to appeal the verdict, referencing previous legal victories achieved by Musk in other cases. They viewed the jury’s mixed findings as a temporary setback and expressed confidence in a successful appeal process.
The trial primarily focused on Musk’s assertions regarding the prevalence of bots on Twitter. Musk contended that Twitter significantly understated the number of fake and spam accounts on its platform compared to what he believed to be accurate. He used this discrepancy as a basis to reconsider the purchase of Twitter.
Following Musk’s attempt to withdraw from the deal, Twitter pursued legal action in Delaware to enforce the original agreement. However, just before the trial was set to commence, Musk reversed his decision and agreed to honor the initial terms of the deal.
Key to the case was whether Musk’s tweets, particularly one on May 13, 2022, indicating the Twitter deal was temporarily halted, were intentionally aimed at driving down Twitter’s stock price. The jury concluded that while Musk had misled investors through certain tweets, his podcast statement was deemed an opinion, and he was not found to have orchestrated a scheme to depress the stock value.
The trial, spanning nearly three weeks in San Francisco federal court, featured testimonies from former Twitter executives and Musk himself, who testified for over a day. Musk maintained during his testimony that Twitter’s leadership had misrepresented the bot statistics on the platform and withheld critical information from him regarding the calculation of fake accounts.
In defense of his actions, Musk highlighted that proceeding with the original deal price ultimately benefited the majority of Twitter shareholders. Despite the temporary uncertainty leading to a drop in Twitter’s share price, Musk emphasized that those who retained their shares profited significantly.
The plaintiffs contended that as Tesla’s stock declined and the cost of acquiring Twitter escalated, Musk strategically issued tweets to lower Twitter’s stock value with the aim of renegotiating the deal at a reduced price or withdrawing from it altogether.
In response, Musk’s legal team argued that the tweets were not part of a calculated plan but rather expressions of opinion. They reiterated Musk’s commitment to upholding the initial agreement’s terms, underscoring the beneficial outcome for shareholders.
Throughout the trial, Musk’s attorneys raised concerns about the fairness of the proceedings, citing public bias against him in San Francisco. Musk had previously faced legal challenges related to social media posts, including a 2018 trial concerning Tesla’s potential acquisition at $420 per share, where he was ultimately cleared of any wrongdoing.
Monte Mann, a business litigation lawyer uninvolved in the case, highlighted the message sent by the verdict, emphasizing the accountability individuals like Musk face when their statements influence market movements. Mann stressed the importance of legal prohibitions against misleading statements, particularly in a context where an individual’s words can swiftly impact financial markets.