Elon Musk artificially drove down the price of Twitter‘s stock in 2022 with tweets claiming the social-media company — which he had already agreed to acquire — had underreported how many fake and spam accounts were on its platform, a federal jury found.
The verdict was handed down Friday in a civil trial in California against Musk brought on behalf of Twitter shareholders, in a lawsuit alleging that Musk was attempting to back out of his agreement to buy Twitter or negotiate a lower price. The jury found that Musk’s tweets in 2022 — saying he was suspending his takeover of Twitter (citing his skepticism about Twitter’s claims that spam and bot accounts were less than 5% of the total) — were materially false or misleading. However, the jury also found that Musk was not liable for “engaging in a scheme to defraud investors.”
Musk’s legal team at Quinn Emanuel Urquhart & Sullivan said in a statement, “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.”
Francis Bottini, a lawyer representing shareholders in the class-action suit, estimated that damages Musk will be required to pay in the matter could run to about $2.5 billion, Reuters reported. “Musk’s status as the world’s richest man is not a free pass,” Bottini said in a statement. “If you’re able to move markets with your tweets you’re responsible for the harm you cause to investors.”
Musk, 54, is the wealthiest individual in the world with a net worth currently estimated at $814 billion, per Forbes.
The jury found two of Musk’s tweets misleading. On May 13, 2022, he wrote, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” In the other one, which came four days later on May 17, Musk claimed without providing evidence that Twitter’s user base could represent “20% fake/spam accounts” and that it “could be *much* higher”; he said “This deal cannot move forward” until Twitter’s then-CEO provided proof of the sub-5% claim. During the trial, Musk’s attorneys had defended those tweets as representing his legitimate concerns about Twitter’s spam/bot issues and argued that they weren’t a scheme to depress the company’s stock price.
The class-action lawsuit, Pampena v. Musk, was brought on behalf of investors who sold Twitter shares between May 13 and Oct. 4, 2022. The suit was filed on Oct. 10 2022, after Musk agreed to consummate his purchase of Twitter for $54.20/share, valuing the deal at $44 billion.
Shortly before the deal closed, Musk said that he and other investors were “obviously overpaying for Twitter right now.” Musk had agreed to buy Twitter for $54.20/share in April 2022, then spent several months trying to back out of the pact. After Twitter sued Musk, seeking to enforce the original terms of the merger agreement, he ultimately agreed to complete the deal at the original purchase price.
In July 2023, Musk renamed Twitter as X (his favorite letter of the alphabet).
Separately, Musk is in talks to settle an SEC lawsuit accusing him of failing to properly disclose his initial purchases of Twitter in early 2022, per a court filing by the agency this week. The SEC’s suit alleged Musk’s undisclosed stock purchases cost other Twitter shareholders at least $150 million because they sold shares at lower prices without knowing that Musk was amassing shares in the company.
Last month, Musk’s SpaceX bought his artificial-intelligence company, xAI, which had previously acquired X. The transaction — valuing the combined entity at $1.25 trillion — is the largest merger of all time, valuing SpaceX at $1 trillion and xAI at $250 billion, per CNBC.
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