A federal jury in San Francisco found Elon Musk liable on claims brought by Twitter shareholders that he sought to drive down the social media company's stock price so he could renegotiate or back out of a $44 billion takeover in 2022. The panel's verdict, announced on Friday, leaves the question of damages to be determined in a subsequent proceeding.
The decision concludes a civil trial in which Musk was accused of falsely asserting that Twitter materially underreported the share of fake and spam accounts - often called bots - on its platform. The dispute focused on a series of public statements Musk made after signing a purchase agreement with Twitter in April 2022, when shareholders say he raised doubts about the company's disclosure that bots comprised roughly 5 percent of accounts.
Musk ultimately completed his acquisition of Twitter in October 2022, later rebranding the platform as X. He has folded the service into his privately held rocket and space exploration company, SpaceX. Lawyers for both Musk and the shareholder plaintiffs were not immediately available for comment after the verdict.
The civil trial began on March 2. Jurors started deliberations on Tuesday before reaching their verdict Friday. Shareholders alleged that Musk publicly questioned Twitter on three occasions about whether the platform was overrun with bots, suggesting the true figure could be as high as 20 percent or more. Among those public statements, plaintiffs highlighted a May 17, 2022, tweet in which Musk said his takeover "cannot go forward" until Twitter's chief executive demonstrated the bot percentage was under 5 percent.
In closing arguments, the shareholders' lawyer, Mark Molumphy, told jurors: "He trashed the company. Trashed the executives. And tanked the stock." Attorneys representing Musk argued that his concerns over bots were sincere and that airing those concerns did not amount to fraud. Michael Lifrak, a lawyer for Musk, urged the jury to view the billionaire's public criticisms as legitimate expression of concern rather than a calculated scheme to manipulate the market.
The lawsuit covers investors who claim they sold Twitter shares at artificially depressed prices between May 13 and October 4, 2022. Those investors contend that Musk's public commentary during that window drove down the share price and led to losses when they sold.
The verdict arrives amid other legal entanglements involving Musk. He has a history of taking disputes with shareholders to court rather than settling. That approach was visible in a 2023 trial in San Francisco over whether he defrauded Tesla shareholders with a 2018 declaration that he had "funding secured" to take the company private. He also faced litigation in Delaware regarding a $139 billion pay package tied to Tesla. Musk prevailed in both of those cases.
Separately from this shareholder suit, Musk is reported to be in negotiations to settle a U.S. Securities and Exchange Commission civil action that accuses him of delaying disclosure of his initial stock purchases of Twitter in 2022 so he could accumulate more shares at lower prices before the market learned of his buying activity.
In another corporate development noted in the trial record, SpaceX purchased Musk's artificial intelligence company, xAI, in February. That transaction, which brought the X platform under the SpaceX umbrella, created what was described at the time as the world's most valuable private company, valued at about $1.25 trillion.
Summary
A San Francisco federal jury found Elon Musk liable for defrauding Twitter shareholders by attempting to depress the company's stock price during his 2022 takeover process. The trial examined his public statements about bot prevalence and their market impact; damages will be decided later.
Key points
- The jury found Musk liable for defrauding Twitter shareholders in connection with his 2022 $44 billion takeover attempt.
- The case centers on Musk's public statements alleging Twitter underreported fake and spam accounts and a May 17, 2022, tweet that questioned the deal moving forward until bot levels were proven under 5 percent.
- Sectors affected include social media platforms, legal services, and broader market perceptions of corporate governance in technology companies.
Risks and uncertainties
- Damages have not yet been set - the financial exposure to Musk and any entities tied to him remains to be determined, creating uncertainty for investors and creditors connected to these entities.
- Ongoing related proceedings, including a potential settlement with the U.S. Securities and Exchange Commission over disclosure timing, present additional unresolved legal risk.
- The ruling could influence litigation strategies and investor behavior in the technology and social media sectors, but the precise market impact is uncertain until damages and any appeals are resolved.