Musk held accountable to Twitter shareholders in a fraud lawsuit concerning the $44 billion acquisition
A U.S. federal jury determined on Friday that Elon Musk was liable for allegations that he deceived Twitter shareholders by attempting to lower the social media company’s stock price to renegotiate or withdraw from a $44 billion acquisition in 2022.
A jury in a San Francisco federal court delivered its verdict in a highly scrutinized civil trial, where Musk, the wealthiest individual globally, faced accusations of making false claims on social media regarding Twitter’s reporting of fake and spam accounts, commonly referred to as bots, on its platform.
While the damages remain uncalculated, Francis Bottini, representing the shareholders, has estimated that they could reach approximately $2.5 billion.
“Musk’s status as the world’s richest man is not a free pass,” Bottini said in a statement. “When your tweets have the power to influence markets, you bear responsibility for any negative impact on investors.”
Musk’s legal team at Quinn Emanuel Urquhart & Sullivan described the verdict as “a bump in the road” in a joint statement. We eagerly anticipate our vindication on appeal.
The civil trial commenced on March 2, with jurors starting their deliberations on Tuesday.
Musk frequently opts to confront shareholders in court instead of reaching a settlement.
This involved a 2023 trial in San Francisco regarding allegations that he defrauded Tesla shareholders, who asserted they incurred losses following his 2018 statement about having “funding secured” to take the electric car company private, as well as legal proceedings in Delaware concerning his $139 billion Tesla compensation package. Musk emerged victorious in both cases.
Musk successfully finalized his acquisition of Twitter in October 2022 and subsequently rebranded it as X.
Musk held accountable for two statements
Shareholders of Twitter contested three assertions made by Musk shortly after he agreed to purchase the platform in April 2022, during which he raised concerns about the prevalence of bots within the company.
Jurors determined that Musk was responsible for two of the statements.
One said the purchase was “temporarily on hold” pending confirmation that bots represented less than 5% of users. Another individual suggested that the proportion of bots might be “much” greater than 20% and that the acquisition could not proceed unless Twitter’s CEO demonstrated that the percentage was below 5%.
Jurors additionally indicated that the shareholders failed to establish a distinct claim that Musk was involved in a scheme to deceive them.
Michael Lifrak, an attorney representing Musk, argued that the billionaire’s worries regarding bots were genuine and that voicing concerns about the issue did not indicate that Musk was engaged in or intended to engage in fraudulent activity.
The lawsuit involves investors who allege they sold Twitter shares at prices that Musk artificially lowered between May 13 and October 4, 2022.
Musk is currently engaged in discussions to resolve a civil lawsuit from the U.S. Securities and Exchange Commission, which accuses him of delaying the disclosure of his initial Twitter purchases in 2022 to acquire more shares at lower prices before investors became aware of his actions.
In February, Musk’s rocket and space exploration company SpaceX acquired his artificial intelligence company xAI, which included X. The acquisition established the most valuable private company globally, valued at approximately $1.25 trillion at that moment.
