Elon Musk misled investors before buying Twitter in 2022, finds US jury — $2.6 billion coming for shareholders?

A U.S. federal jury in California on Friday ruled that Elon Musk, the world’s richest billionaire, is liable for allegations that he misled Twitter shareholders by trying to lower the social media company’s share price so he could renegotiate or abandon a $44 billion deal in 2022. But the jury cleared Musk of charges that he carried out a “scheme” to defraud investors.

Jurors in federal court in the civil case in San Francisco agreed that Musk intentionally misled Twitter shareholders by posting two tweets in May 2022 and saying in a podcast that he had too many fake accounts on Twitter, and he tried to back out of the deal.

The jury found that this was done intentionally to defraud Twitter shareholders, who sold their shares based on Musk’s statements.

What were the accusations against Elon Musk?

The class-action lawsuit was filed just before Elon Musk took control of Twitter in a $44 billion deal that he would later rename as X.

While a jury rejected two of the fraud allegations, the billionaire’s lawyers vowed to appeal.

Musk was accused on social media of claiming that Twitter was underreporting the number of fake and spam accounts, known as bots, on its platform.

Twitter shareholders objected to three statements Musk made shortly after agreeing to acquire Twitter in April 2022. Jurors found him responsible for two of the three statements.

One statement said Twitter’s acquisition was “temporarily suspended” until it could be confirmed that bots represented less than 5% of users. The other said the percentage of bots could be “very” higher than 20 percent and that the takeover could not proceed unless Twitter’s CEO could prove it was less than 5 percent.

Jurors heard nearly two weeks of live testimony from Musk and senior Twitter executives at the time.

Former Twitter executives described the company going through turbulence for six months in 2022, during which the billionaire wavered over whether to buy the platform, culminating in a court fight that forced him to keep his promise.

$2.6 billion loss

According to investors’ lawyer Mark Molumphy, Twitter investors will likely be entitled to $2.6 billion in compensation following the decision.

But such a high reward is unlikely to do much damage to Elon Musk’s net worth, which stood at $661.1 billion as of Friday, according to the Bloomberg Billionaires Index.

The jury awarded shareholders compensation of approximately $3 to $8 per share per day.

Announcing the decision, the plaintiff’s lawyers said that the loss was approximately $2.1 billion in stock and $500 million in options.

“This is a significant victory not only for Twitter investors but also for the public markets,” said plaintiffs’ attorney Joseph Cotchett. “I think the jury’s verdict sends a strong message that because you’re a rich and powerful person, you still have to follow the law and no one is above the law.”