A jury in California found Elon Musk liable for misleading Twitter investors during the months leading up to his $44 billion acquisition of the social media company, which he later renamed X. The civil trial centered on a class-action lawsuit filed just before Musk took control of Twitter, with jurors asked to decide if Musk's tweets and public comments in May 2022 intentionally defrauded shareholders who sold their shares based on his statements [1][2]. The jury unanimously determined that Musk's tweets on May 13 and May 17, including one stating the deal was 'temporarily on hold,' were materially false or misleading, causing Twitter shares to slide by almost 10% in a single session [2]. However, the jury absolved Musk of some fraud allegations, finding he did not 'scheme' to mislead investors [1][2].
Damages awarded to shareholders range between about $3 and $8 per stock per day, amounting to approximately $2.1 billion in stock and another $500 million in options according to plaintiffs' lawyers [1]. Attorneys for the plaintiffs in the CNBC report said total damages could reach up to $2.6 billion [2]. The discrepancy in damage estimates is noted: according to [1], the figure is $2.6 billion, while [2] reports $2.1 billion in stock and $500 million in options. The claims administration process is expected to begin in about 90 days, with investors recouping losses in the following months [2].
Much of the trial focused on Musk's claims about the number of bots and fake accounts on Twitter. Musk testified that Twitter had a much higher number of fake and spam accounts than the 5% it disclosed in regulatory filings, using this as a reason to retreat from the purchase [1][2]. After Musk attempted to back out, Twitter went to court in Delaware to force him to honor his original deal, and Musk ultimately agreed to pay the initially promised price [1].
Musk's legal team, Quinn Emanuel Urquhart & Sullivan, stated, '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' [1][2]. Plaintiffs' attorney Joseph Cotchett commented, 'I think the jury’s verdict sends a strong message that just because you’re a rich and powerful person, you still have to obey the law, and no man is above the law' [1][2].
Former Twitter shareholders argued that Musk's remarks pressured the board to sell at a lower price, motivated by declines in Tesla's stock price, which would require Musk to sell more Tesla shares to finance the buyout [2]. Musk's fortune is estimated at about $814 billion, much of it tied up in Tesla shares [1].
CONCLUSION
The jury's verdict against Elon Musk for misleading Twitter investors is a significant legal and financial development, with damages potentially reaching up to $2.6 billion. While Musk was absolved of orchestrating a fraud scheme, the ruling underscores the impact of his public statements on market prices and investor decisions. The outcome is expected to have high market implications, especially as Musk's legal team plans to appeal.