A federal jury in California found Friday that tech tycoon Elon Musk misled Twitter shareholders, driving down the company’s share price as he was poised to buy it in a $44 billion deal. But the jury absolved him of some fraud allegations, finding that he did not “scheme” to mislead investors.
The verdict in the class action securities lawsuit means the world’s richest person could be ordered to pay billions of dollars, according to damages calculated by jurors.
Minutes after the judgment was announced, the entrepreneur’s lawyers informed AFP that their client will appeal the decision, characterising it as a “setback”.
After a three-week trial in a San Francisco federal court – which included in-person testimony from Musk – the jury found that two tweets posted in May 2022 by the Tesla and SpaceX CEO contained false statements responsible for a plunge in Twitter’s share price.
Investor Giuseppe Pampena had filed the suit on behalf of people who sold Twitter shares between mid-May and early October 2022.
Musk acquired the social media platform in late October 2022 and later renamed it X.
Jurors agreed that Musk violated a securities rule that bars false and misleading statements that sink a stock price, in this case that of Twitter, the verdict form showed.
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.
“It’s an important victory, not just for investors of Twitter, but for the public markets,” said Mark Molumphy, an attorney for the plaintiffs. “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.”
Musk, who has a near-constant presence on X, did not immediately react to the verdict.
Teflon tycoon?
The judgment marks a rare legal defeat for Musk, often dubbed “Teflon Elon” for his ability to emerge unscathed from lawsuits he is expected to lose.
His lawyers, in fact, reminded AFP of this track record, noting that a Texas court cleared him just that same day in a separate defamation case.
In 2023, a jury in the same San Francisco federal court cleared him within hours of similar charges brought by Tesla shareholders, following his 2018 tweets claiming he had the funding to take the automaker private.
The civil complaint in California accused Musk of driving down Twitter’s stock price to gain leverage to renegotiate the purchase price or get out of the deal completely, causing people who sold shares to lose money.
Musk tweeted at one point during the process that the acquisition deal was temporarily on hold until Twitter executives could prove the percentage of “bots” – fake accounts run by software instead of real users – was as low as the social media platform claimed.
The plaintiffs contended that these statements were part of a scheme designed to pressure the board of directors into accepting a price lower than his initial offer – at a time when Tesla’s share price was falling, meaning Musk would have to sell more of his shares to finance the deal.
Monte Mann, a business litigation lawyer who was not a part of the case, said the “verdict sends a clear message – if you move the market with your words, you own the consequences”.
“The law has always prohibited misleading statements. What’s new is the scale and speed,” Mann said. “When one person can move billions with a tweet, the consequences of those statements are amplified – and juries are starting to take that seriously.”
Musk abandoned his effort to get out of buying Twitter in late 2022 after the company took him to court to uphold the contract.
Musk has since merged the social media platform with his artificial intelligence startup xAI and his private space exploration firm SpaceX.
Forbes magazine early this month estimated Elon Musk’s net worth at $839 billion, a figure based primarily on his stakes in his portfolio of companies including Tesla and SpaceX.
(FRANCE 24 with AFP and AP)
