A California jury on Friday found Elon Musk liable for misleading investors in the run-up to his $44 billion acquisition of Twitter, now known as X, potentially exposing him to damages reaching up to $2.6 billion. The verdict, delivered in San Francisco federal court, centers on claims that Musk artificially deflated Twitter’s stock price through public statements regarding the number of bot and spam accounts on the platform.
The class action lawsuit, Pampena v. Musk, was originally filed in October 2022, shortly after Musk completed the purchase of Twitter for $54.20 per share. Investors alleged that Musk’s pronouncements about the prevalence of bots, and subsequent questioning of the deal, were intentionally misleading and caused significant financial losses.
During the trial, Musk testified that he did not intend to mislead investors and that his comments were simply observations that were misinterpreted. The jury, however, unanimously disagreed, finding that certain of his public claims were intentionally misleading. Specifically, the jury found that Musk lowered the stock price by between $3 and $8 per share between May and October 2022, according to court filings.
“This is a great example of what you cannot do to the average investor — people that have 401ks, kids, pension funds, teachers, firemen, nurses,” Joseph Cotchett, an attorney for the Twitter investors, told CNBC outside the courthouse. “That’s what this case was all about. This was not about Musk. It was about the whole operation.”
Musk’s legal team, Quinn Emanuel, released a statement characterizing the verdict as “a bump in the road” and expressing confidence in an eventual appeal. They noted the jury had also found against some of the plaintiffs’ fraud claims.
The legal battle stems from a period of intense volatility surrounding the acquisition. Musk initially expressed strong interest in buying Twitter in April 2022, but subsequently attempted to withdraw from the deal, citing concerns about the accuracy of the company’s reporting on bot accounts. He ultimately completed the purchase in October 2022 after a protracted legal dispute.
Following the acquisition, Musk rebranded Twitter as X and initiated significant changes to the platform, including alterations to content moderation policies and the introduction of a subscription service. He has also merged X with his artificial intelligence company xAI, and then with SpaceX, his reusable rocket manufacturer.
The jury’s decision marks the latest legal challenge for Musk, though he previously prevailed in a 2023 lawsuit brought by Tesla shareholders over his tweets about that company. The potential damages in the Twitter case could represent a substantial financial burden for Musk, and the outcome is likely to be closely watched by investors and legal experts alike.
Attorneys for the investors have indicated that the process of determining the exact amount of damages owed to each class member will now begin. Musk’s legal team has not yet announced a timeline for filing an appeal.
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