Jury finds Musk misled Twitter investors

A federal jury in San Francisco has found Elon Musk liable for misleading Twitter shareholders in 2022 as he attempted to complete his $44 billion takeover of the social media company. Jurors concluded that Musk’s public statements were aimed at driving down Twitter’s stock price so he could renegotiate the deal or potentially walk away from it.

The verdict came in a closely watched civil trial that began on March 2 and went to the jury on March 18. Deliberations lasted three days before the decision was announced on Friday. Damages will be determined at a later stage of the case.

Jurors found that Musk made two misleading statements in the run-up to the purchase, including tweets in May 2022 suggesting the deal was “temporarily on hold” and questioning Twitter’s reported number of fake and spam accounts. A May 17, 2022 tweet said the takeover “cannot go forward” until Twitter’s chief executive proved bots were under 5% of accounts.

The jury concluded that Musk’s complaints about bots were intended to lower Twitter’s value and secure a better price, and the class alleges that investors who sold shares between May 13 and October 4, 2022, did so at prices depressed by his statements. However, jurors rejected some fraud claims, including allegations that he “schemed” to mislead investors and a claim tied to a podcast appearance.

According to one account of the verdict, damages will be determined later and no per-share award had been decided at the time, though the total payout for the class has yet to be finalized.

Much of the trial focused on Musk’s repeated challenges to Twitter’s disclosure that fake and spam accounts made up about 5% of users. Musk asserted that the actual figure could be 20% or higher and cited this as a basis for pausing or abandoning the deal.

Shareholders’ lawyer Mark Molumphy argued in closing that Musk “trashed the company, trashed the executives, and tanked the stock.” Musk’s attorney, Michael Lifrak, countered that Musk’s concerns about bots were genuine and that his public comments did not show he committed or intended to commit fraud.

Musk ultimately completed the acquisition in October 2022 and later renamed Twitter as X. He has since folded X into his rocket and space exploration company SpaceX, following a February purchase in which SpaceX bought Musk’s artificial intelligence company xAI, which housed X. That transaction created what was described as the world’s most valuable private company at about $1.25 trillion at the time.

The Twitter shareholder case adds to Musk’s extensive legal history with investors and regulators. He previously prevailed in a 2023 San Francisco trial over whether he defrauded Tesla (TSLA) shareholders with his 2018 “funding secured” tweet, and in separate Delaware litigation over his $139 billion Tesla (TSLA) pay package.

Separately from the shareholder class action, Musk is in talks to settle a U.S. Securities and Exchange Commission civil lawsuit accusing him of waiting too long in 2022 to disclose his initial Twitter stock purchases, allegedly allowing him to buy more shares at lower prices before the market understood his intentions.

Lawyers for Musk and the shareholder plaintiffs, as well as representatives for X, did not immediately respond to requests for comment following the latest verdict.