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. But not long afterward, he made public statements questioning whether the social media company was overrun with fake and spam accounts, known as bots.
Musk also posted a tweet saying that his purchase of Twitter was “temporarily on hold” pending confirmation that bots represented less than 5% of users.
In another tweet, he said the percentage of bots could be “much” higher than 20%, and that the takeover could not proceed unless Twitter’s chief executive proved the percentage was less than 5%.
Musk tried to back out of the Twitter purchase, prompting the company to sue in Delaware to force him to honor his original deal.
Just before that case was scheduled to go to trial, Musk reversed course again and agreed to pay what he had originally promised.
He ultimately completed his purchase of Twitter in October 2022 and renamed it X.
What did the jury say?
Twitter shareholders subsequently filed a class-action lawsuit against Musk.
A nine-person jury was asked to decide if the two tweets and comments Musk made on a podcast in May 2022 amounted to him intentionally defrauding Twitter shareholders, who sold their shares based on Musk’s statements.
The nearly three-week trial, which began on March 2, saw testimony from former Twitter executives, including CEO Parag Agrawal and CFO Ned Segal, as well as Musk.
In his testimony, Musk maintained that Twitter’s leadership lied about the number of bots on the platform. He also accused them of withholding information from him about how the number of fake accounts was calculated.
The jurors, however, found that Musk violated a securities rule that bars false and misleading statements that artificially drive down a stock price, in this case that of Twitter, according to the verdict form.
But they also said the shareholders didn’t prove a separate claim that Musk engaged in a scheme to defraud them.
Will Musk appeal the ruling?
The lawsuit covers investors who claimed to sell Twitter shares at prices Musk artificially depressed between May 13 and October 4, 2022.
The jury awarded the shareholders between about $3 and $8 per stock per day as damages, which the plaintiffs’ lawyers estimate to total about $2.5 billion.
Joseph Cotchett, an attorney for the plaintiffs, said, “It’s an important victory, not just for investors of Twitter, but for the public markets.” He added that it “sends a strong message” that “no man is above the law.”
In a joint statement, Musk’s lawyers at Quinn Emanuel Urquhart & Sullivan called the verdict “a bump in the road. And we look forward to vindication on appeal.”
Edited by: Karl Sexton
