Elon Musk misled Twitter investors ahead of acquisition, jury says
A California jury on Friday concluded that Elon Musk misled Twitter investors ahead of his $44 billion acquisition of the social media giant in 2022.
The verdict from a jury in San Francisco federal court came in a closely watched trial in which Musk was accused of falsely claiming that Twitter underreported how many fake and spam accounts, known as bots, were on its platform.
Musk ultimately completed his purchase of Twitter in October 2022 and renamed it X. He has since folded it into his rocket and space exploration company SpaceX.
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The class action lawsuit, Pampena v. Musk, was filed in October 2022.
"This verdict sends a clear message — if you move the market with your words, you own the consequences," said Monte Mann, a trial lawyer at Armstrong Teasdale.
"Going forward, this will have a real chilling effect. Executives and dealmakers will need to think carefully about how public statements can be interpreted — not just as disclosure but as part of the negotiation itself."
Twitter shareholders challenged Musk for having publicly questioned on three occasions after agreeing in April 2022 to buy Twitter whether the company was overrun with bots and perhaps had 20% or more rather than the 5% it disclosed.
Shareholders cited, among other things, a May 17, 2022, tweet in which Musk said his takeover "cannot go forward" until Twitter's chief executive proved the bot percentage was less than 5%.
"He trashed the company. Trashed the executives. And tanked the stock," the shareholders' lawyer, Mark Molumphy, said during his closing argument Tuesday.
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Michael Lifrak, a lawyer for Musk, countered that the billionaire's concern about bots was real and that speaking out about the problem did not show Musk committed or intended to commit fraud.
Musk has on multiple occasions chosen to battle shareholders in court rather than settle, including in a 2023 trial concerning his electric car company Tesla and litigation over his $139 billion Tesla pay package.
He won both cases. Musk is now also in talks to settle a U.S. Securities and Exchange Commission lawsuit accusing him of violating federal law by waiting too long in 2022 to disclose his initial purchases of Twitter so he could scoop up more before investors caught on.
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The trial in San Francisco began March 2. The lawsuit covers investors who sold Twitter stock between May 13, 2022, and Oct. 4, 2022.
"The verdict isn’t just about Musk, it’s about the rules of engagement for modern dealmaking," Mann said.
Musk is the world's richest person with a net worth of $839 billion, according to Forbes.
Reuters contributed to this report.