SAN FRANCISCO (AP) 鈥� A jury has found Elon Musk liable for defrauding investors by price in the tumultuous months leading up to his 2022 acquisition of the social media company for $44 billion. But it absolved him of some fraud allegations, finding that he did not 鈥渟cheme鈥� to mislead investors.
The civil trial in San Francisco centered on a class-action lawsuit filed just before Musk took control of Twitter, which he later renamed X. Jurors were asked to decide if two tweets and comments Musk made on a podcast in May 2022 amounted to him intentionally defrauding Twitter shareholders, who sold their shares based on Musk’s statements.
The nine-person jury returned the verdict after nearly four days of deliberation, nearly three weeks after the trial began on March 2. They said that while Musk was liable for misleading investors with two tweets 鈥� including one said the Twitter deal was 鈥渢emporarily on hold,鈥� he did not do so with a statement he made on a podcast and that he did not intentionally 鈥渟cheme鈥� to defraud investors.
The jury awarded shareholders between about $3 and $8 per stock per day as damages, which the plaintiffs’ lawyers said amounts to about $2.1 billion in stock and another $500 million in options. Musk’s fortune is currently estimated at about $814 billion, much of it tied up in Tesla shares.
鈥淚t鈥檚 an important victory, not just for investors of Twitter, but for the public markets,鈥� said Mark Molumphy, an attorney for the plaintiffs. “I think the jury鈥檚 verdict sends a strong message that just because you鈥檙e a rich and powerful person, you still have to obey the law, and no man is above the law.鈥�
Musk’s legal team referenced other cases Musk won and said they will appeal.
鈥淟ast month, Elon won the largest appellate victory in this country鈥檚 history after getting an unfair shake at the trial level. Earlier today, in a Texas court he won another appellate victory in which the trial judge was reversed,” the legal team at Quinn Emanuel Urquhart & Sullivan said in a statement. 鈥淲e view today鈥檚 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.鈥�
Much of the trial focused on Musk鈥檚 claims about the number of bots on Twitter. Musk testified that Twitter had a much higher number of fake and spam accounts than the 5% it disclosed in regulatory filings. He used what he called Twitter鈥檚 misrepresentation of the number of fake accounts on its service as a reason to retreat from the purchase.
After Musk , Twitter went to court in Delaware to force him to honor his original deal. Just before that case was scheduled to go to trial, Musk reversed course again and agreed to pay what he had originally promised.
The central question of the case was whether Musk sent out tweets 鈥� including one on May 13, 2022, that said the Twitter deal was 鈥渢emporarily on hold鈥� while he sought information on the number of fake accounts on the service 鈥� as a deliberate scheme to tank Twitter鈥檚 shares. The jury found that while Musk did mislead investors with two tweets, he did not do so with a statement he made on a podcast because it was an opinion. The jurors also absolved him of scheming to drive down the stock.
The nearly three-week trial in San Francisco federal court for the Northern District of California saw testimony from former Twitter executives including CEO Parag Agrawal and CFO Ned Segal, as well as Musk, who was on the stand for more than a day.
In his testimony, that Twitter鈥檚 leadership lied about the amount of bots on the platform and withheld information from him about how the number of fake accounts was calculated. He repeatedly described the information that Twitter鈥檚 board provided with an abbreviation for a bull鈥檚 scatology. 鈥淚 did make it clear that I thought it was BS,鈥� Musk said of Twitter鈥檚 calculations asserting that only about 5% of its accounts were bots.
Musk also asserted that his decision to follow through on the deal at the original sales price provided a huge windfall for most Twitter shareholders.
But Twitter鈥檚 shares fell below $33, or about 40% below Musk鈥檚 original purchase price, while the deal was hanging in limbo. That downturn cost shareholders who sold their stock during the uncertainty caused by what the lawsuit alleges was Musk鈥檚 deceitful behavior.
鈥淚 can鈥檛 control whether people sell their stock, but everyone who held the stock fared extremely well,鈥� Musk said.
The plaintiffs argued that, as Tesla鈥檚 stock price declined and buying Twitter became too expensive for Musk, he tweeted statements that drove down the stock price in the hopes he could renegotiate the deal for a lower price or get out of it altogether.
Musk鈥檚 tweets, the plaintiffs鈥� lawyer argued, were not some 鈥渋nnocent mistake鈥� or a 鈥渟tupid tweet鈥� off the top of his head, but carefully calculated to drive down鈥檚 Twitter鈥檚 stock price.
In closing arguments, Mark Molumphy, a lawyer for the plaintiffs, asked jurors to hold Musk accountable and compensate thousands of investors who lost money because of tweets Musk sent, including one from May 13, 2022, that said the deal was 鈥渙n hold.鈥�
鈥淗e knew what he was doing,鈥� Molumphy said.
Musk鈥檚 lawyers motioned for a mistrial several times during the contentious trial, contending that the billionaire Tesla CEO can鈥檛 get a fair trial in San Francisco because of animosity toward him from the public.
This isn鈥檛 the first time that Musk has been dragged into court to defend himself against allegations of duping investors with his social media posts. Three years ago, Musk spent about eight hours about his plans to buy Tesla 鈥� the electric automaker that he still runs as a publicly traded company 鈥� for $420 per share in a proposed 2018 deal that never materialized. A nine-member jury in that case.
Monte Mann, a business litigation lawyer who was not a part of the case, said the “verdict sends a clear message鈥攊f you move the market with your words, you own the consequences.鈥�
鈥淭he law has always prohibited misleading statements. What鈥檚 new is the scale and speed,” Mann said. “When one person can move billions with a tweet, the consequences of those statements are amplified 鈥� and juries are starting to take that seriously.鈥�
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