A California jury found Elon Musk liable for misleading Twitter investors by making public statements casting doubt on his eventual $44 billion acquisition of the social media giant, contributing to a huge drop in the company’s stock price.
A class-action lawsuit was filed in federal court against the world’s richest man in 2022, just before he fully took control of Twitter.
The plaintiffs argued that they, along with countless other investors, were duped into selling their shares primarily because Musk tweeted that the Twitter deal was ‘temporarily on hold‘ on May 13, 2022.
Musk was concerned there were many more spam or fake accounts on the platform than Twitter had publicly disclosed. He believed about five percent of all accounts were bots.
The plaintiffs argued that Musk made these statements to intentionally drive down the value of the shares so he could negotiate a lower purchase price.
On May 16, 2022, Musk publicly suggested that the deal price could change, saying during a Miami tech conference that it wouldn’t be ‘out of the question’ to buy Twitter for less than the $44 billion that had already been agreed upon.
After nearly four days of deliberation, a nine-person jury in San Francisco found that Musk misled investors with his tweet saying the deal was ‘temporarily on hold’.
At the same time, jurors did not agree with the plaintiffs that Musk orchestrated a deliberate fraud scheme.
Elon Musk (pictured entering federal court on March 4) was found liable by a California jury for misleading investors during the chaotic six-month period in 2022 when he acquired Twitter for $44 billion.
The plaintiffs said Musk intentionally drove down the stock price with various public statements in order to negotiate a lower purchase price Jurors said this tweet from Musk misled investors by saying the deal was ‘temporarily on hold’. Total damages could swell to $2.5 billion, depending on how many investors sign on to the class action. Musk plans to appeal the verdict.
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The jury awarded damages that are expected to total around $2.5 billion, which will depend entirely on how many people file to be part of the class action, according to attorneys for the plaintiffs.
Musk is worth about $814 billion, with most of wealth tied up in shares of Tesla.
‘It’s an important victory, not just for investors of Twitter, but for the public markets,’ said Mark Molumphy, an attorney for the plaintiffs. ‘I think the jury’s verdict sends a strong message that just because you’re a rich and powerful person, you still have to obey the law, and no man is above the law.’
Musk’s lawyers plan to appeal the case, citing separate unrelated cases in Texas and Delaware where Musk won appeals.
‘We view today’s verdict, where the jury found both for and against the plaintiffs and found no fraud scheme, as a bump in the road. And we look forward to vindication on appeal,’ the legal team at Quinn Emanuel Urquhart & Sullivan said in a statement.
The Daily Mail approached Musk’s lawyers for comment.
The nearly three-week trial in San Francisco federal court for the Northern District of California began on March 2 and featured testimony from former Twitter CEO Parag Agrawal and former CFO Ned Segal.
Musk also testified for more than day, during which he maintained that Twitter’s leadership lied about the number of bots there were.
He also claimed that his decision to follow through on the deal in October 2022 provided a huge windfall for investors who held onto their shares.
The nearly three-week trial in San Francisco federal court for the Northern District of California began on March 2 and featured testimony from former Twitter executives who were integral in the deal, including former CEO Parag Agrawal Musk also testified and maintained that Twitter executives lied about the number of bots on the platform, which he believed should have given him the right to walk away from the deal
‘I can’t control whether people sell their stock, but everyone who held the stock fared extremely well,’ he said on the stand.
The plaintiffs argued that Musk engineered the chaotic six months it took for the deal to eventually go through.
It began in April 2022, when he signed a binding merger agreement to buy the company at a valuation of roughly $54.20 per share.
In July 2022, Musk officially sought to end the deal, prompting Twitter to sue him for breach of contract. On July 11, the stock sank to $32.65, roughly 40 percent lower than the offer price.
The trial for that case was set to kick off in October 2022, but Musk confirmed in his own testimony that his lawyers advised him ‘there was no choice’ but to buy Twitter at the original price.
So, on October 27, 2022, the deal closed, just before the court-ordered deadline. Musk has since overhauled Twitter, renaming it X, laying off thousands of employees and merging the company with his AI startup xAI.
Musk said he still believes the inflated user numbers on Twitter should have given him grounds to walk away from the deal. He also acknowledged that his tweet about the number of bots wasn’t his ‘wisest’.
‘I am not sure I would call it incredibly stupid, but if it led to this trial, it probably qualifies as such,’ he said.
Daily Mail
