San Francisco – A California jury found on Friday that Elon Musk misled Twitter shareholders during his tumultuous 2022 acquisition of the social media platform. However, the jury did not find that Musk deliberately manipulated the stock price. Minutes after the verdict, Musk’s legal team announced their client intends to appeal the decision, calling it a “setback.” The ruling came almost exactly twenty years to the day after the first tweet in history was published by Twitter co-founder Jack Dorsey on March 21, 2006.
After three weeks of a civil trial featuring in-person testimony from the world’s richest man, who purchased Twitter in October 2022 for $44 billion, the jury in U.S. District Court for the Northern District of California determined that two tweets posted by the Tesla CEO in May 2022 contained false statements that contributed to a decline in Twitter’s stock value. Damages, which are still to be determined, are estimated at $2.6 billion by the plaintiffs’ attorneys, according to Mark Molumphy, one of the lawyers representing them.
The trial centered largely on Musk’s claims regarding the number of fake accounts on Twitter. He asserted that the platform had significantly more spam and automated accounts than the 5% figure disclosed in its regulatory filings, using this as justification for his attempt to withdraw from the acquisition agreement. Following Musk’s initial post on the matter in May 2022, the stock price fell 17% over two trading sessions, prompting some shareholders to sell their shares.
Plaintiffs argued that these statements were part of a plan to pressure Twitter’s board into accepting a lower price than his initial offer, as Tesla’s stock price was declining and making financing the deal more expensive. Twitter sued Musk in Delaware to compel him to honor the agreement after he attempted to back out. Shortly before that trial began, Musk reversed course and agreed to pay the original price, subsequently renaming the platform “X.” Some shareholders sold their shares at a discount of more than 30% compared to the final price paid by Musk.
During the trial, Musk testified that he didn’t believe disclosing his growing stake in Twitter early in 2022 was “material,” and that he hadn’t tweeted about it or informed the Securities and Exchange Commission because he frequently buys stock in other companies. According to the Associated Press, Musk stated that when he did initiate acquiring Twitter stock, the price jumped 27% in a single day.
The lawsuit was filed on behalf of shareholders who sold stock between May 13 and October 4, 2022, alleging violations of federal securities laws. The jury found Musk made false and misleading statements “carefully calculated to drive down the price of Twitter stock,” according to the complaint.
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