Elon Musk Liable for Twitter Stock Drop After Investor Lawsuit

A federal jury in San Francisco on Saturday found Elon Musk liable for defrauding Twitter shareholders, concluding that his public statements about the social media platform were intended to drive down its stock price before his $44 billion acquisition in 2022. The verdict, delivered after a three-week trial, marks an unusual legal defeat for the billionaire, who has previously prevailed in similar shareholder lawsuits.

The lawsuit centered on Musk’s behavior after agreeing to purchase Twitter in April 2022. Investors alleged that Musk, beginning in May 2022, repeatedly questioned the accuracy of Twitter’s reporting of bot and spam accounts, suggesting the platform was significantly overrun with inauthentic users. These statements, made through tweets and public pronouncements, led to a decline in Twitter’s stock price as investors grew concerned about the deal’s viability.

“He trashed the company. Trashed the executives. And tanked the stock,” argued Mark Molumphy, the lawyer representing the Twitter investors, during closing arguments. The jury ultimately agreed with the investors’ claim that Musk’s actions were deliberately aimed at creating a pretext to renegotiate or abandon the acquisition.

Even as the jury found Musk liable on two of the four fraud claims presented, they also determined he did not engage in a broader “scheme to defraud” Twitter investors. The exact financial penalty Musk will face remains to be determined, but legal experts anticipate it could reach billions of dollars. Musk’s current net worth is estimated at $661 billion, according to reports.

Musk ultimately completed the purchase of Twitter in October 2022, fulfilling his original offer of $54.20 per share, a total of approximately $44 billion. He subsequently rebranded the company as X, integrating it into his space exploration and rocket company, SpaceX.

Throughout the trial, Musk testified that he did not intend for his comments to negatively impact the stock price or harm investors. His legal team maintained that he was simply voicing legitimate concerns about the platform’s bot problem. However, the jury sided with the investors, finding that his statements were made with the intent to manipulate the market.

“We are thrilled with the jury’s decision today,” Molumphy stated. “We believe that it is the largest securities jury verdict in United States history. The jury sent a strong message that no one is above the law.”

Legal observers note the nuanced nature of the verdict. Monte Mann, a lawyer with Armstrong Teasdale who followed the case, emphasized that not every market-moving statement constitutes liability. “But context, timing, and intent can tip the balance,” he said.

In a written statement, Musk’s legal team characterized the verdict as “a bump in the road” and expressed confidence in their ability to secure a reversal on appeal, citing previous successful appeals in other cases. The team indicated they “glance forward to vindication on appeal.”

The period under scrutiny by the jury spanned roughly from April to October 2022. During this time, Musk initially indicated he was “temporarily on hold” with the Twitter acquisition in a May 2022 tweet, causing the stock to fall as much as 20% in the following 24 hours. Investors involved in the lawsuit claimed they were forced to sell their shares at prices below the $54.20 offer price as the deal’s future became uncertain.

In 2022, the completion of Musk’s acquisition of Twitter followed months of legal battles, as reported by the BBC. The deal, valued at $44 billion, brought an conclude to a period of uncertainty surrounding the platform’s future.