Elon Musk Twitter verdict misled investors before $44 billion purchase

A jury in California found that Elon Musk defrauded Twitter shareholders in his $44 billion acquisition of the social media company, according to a verdict released Friday.

Plaintiffs’ attorneys said total damages could be as high as $2.6 billion.

class action lawsuit, Pampena / Musk, This application was first made in October 2022, after Musk purchased Twitter for $54.20 per share. He later renamed the company X, merging it first with artificial intelligence company xAI and then with reusable rocket maker SpaceX.

“This is a great example of things you can’t do to the average investor — people with 401Ks, kids, retirement funds, teachers, firefighters, nurses,” Joseph Cotchett, a lawyer for Twitter investors, told CNBC at the San Francisco courthouse. “That’s what this case was all about. This wasn’t about Musk. It was about the entire operation.”

Musk’s attorneys, along with Quinn Emanuel, said in an emailed statement: “We view today’s verdict, in which the jury found both for and against the plaintiffs and found no fraudulent scheme, as a roadblock. And we look forward to being vindicated on appeal.”

After Musk made a bid to buy Twitter in April 2022, sentiment towards the deal quickly soured as the company cast doubt on the alleged level of bots, spam and fake accounts on its platform. Musk wrote in a tweet the following month that his acquisition was “temporarily on hold” until Twitter’s CEO could prove that the inauthentic account levels were around the 5% reported in the company’s SEC filings.

Musk’s tweets and additional comments caused Twitter shares to fall nearly 10% in a single session. The jury deliberated for four days and unanimously found that Musk’s tweets on May 13 and May 17 were materially false or misleading.

Former Twitter shareholders, including retail investors and options traders, argued that Musk’s remarks amounted to a plan to pressure the company’s board of directors into selling to him for less than his initial offer. They claimed they were motivated by declines in stock prices Tesla’sThat would require him to sell more shares in the automaker than he intended to finance the acquisition.

The plaintiffs said they sold their shares for less than $54.20 in response to Musk’s posts and comments during press interviews. The potential loss figure is based on expert estimates of how much Musk’s flip-flop affected the stock price during the class period.

Lawyers for Twitter investors said it would take about 90 days to set up claims management, followed by several months for the government to process the claims and begin recouping some of investors’ losses.

Musk’s lawyers argued that their client’s remarks were based on well-founded concerns about bots, spam and fake accounts on Twitter and did not amount to securities fraud or a plan to depress the company’s stock price.

Although Musk made false and misleading statements that harmed some Twitter shareholders, he made no specific plan to defraud investors, the jury said.

While the decision marks a harsh rebuke for Musk, the financial ramifications are minimal considering his net worth, which currently stands at around $650 billion. Bloomberg.

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