【Musk's Twitter Acquisition Case】Musk Ruled to Have Committed Fraud Against Twitter Shareholders Over Alleged Deliberate Stock Price Suppression; Could Face Massive Damages

Tesla (US: TSLA) founder Elon Musk was on Friday (20th) found legally responsible by a jury in the U.S. San Francisco federal court for deliberately suppressing Twitter’s stock price during the turbulent months before his $44 billion acquisition of the social media company in 2022, thereby defrauding investors. Musk’s legal team announced they will appeal.

The jury acquitted Musk of some fraud charges, ruling that he did not “scheme” to mislead investors.

This civil trial in San Francisco centered around a class-action lawsuit filed shortly before Musk took over Twitter (later renamed X). The jury had to decide whether Musk’s two tweets in May 2022 and comments made on a podcast constituted intentional fraud against Twitter shareholders. These shareholders sold their stock based on Musk’s statements.

According to multiple media reports, after nearly four days of deliberation, the jury reached a verdict nearly three weeks after the trial began on March 2. The jury stated that while Musk was responsible for misleading investors with two tweets (one claiming the Twitter acquisition was “temporarily on hold”), his statements on the podcast did not constitute misdirection, and he did not intentionally “scheme” to defraud investors.

The jury ruled that Musk will pay shareholders approximately $3 to $8 per share daily in damages, with the final amount to be determined after claims are submitted. The plaintiffs’ lawyers said this amounts to about $2.1 billion in stock and $500 million in options. Musk’s current net worth is estimated at around $814 billion, most of which is held in Tesla stock.

According to AP, the core issue in this case was whether Musk intentionally posted tweets—including one on May 13, 2022, stating that the acquisition was “temporarily on hold” due to his investigation into fake accounts on Twitter—with the intent to depress Twitter’s stock price. The jury found that although Musk did mislead investors through two tweets, his statements on the podcast did not, as they reflected his personal opinion. The jury also concluded that he did not deliberately lower the stock price.

During nearly three weeks of trial at the Northern District of California federal court in San Francisco, several former Twitter executives, including former CEO Parag Agrawal and CFO Ned Segal, testified. Musk himself testified for over a day.

Twitter stock once fell below $33, 40% below Musk’s initial purchase price

In his testimony, Musk insisted that Twitter management lied about the number of bots on the platform and concealed how they calculated fake accounts. He repeatedly used a vulgar slang to describe the information provided by Twitter’s board. “I clearly said I think this is nonsense,” Musk said when discussing Twitter’s claim that only about 5% of accounts are bots.

Musk also claimed he decided to complete the deal at the original price, bringing huge gains to most Twitter shareholders.

However, during the period when the deal was uncertain, Twitter’s stock fell below $33, about 40% below Musk’s initial acquisition price. This decline caused shareholders who sold during the market uncertainty to suffer losses, which is the very fraud allegation in the lawsuit.

Musk stated he could not control whether people sold their stock, but all stockholders benefited greatly.

The plaintiffs argued that as Tesla’s stock price declined, acquiring Twitter became too expensive for Musk, prompting him to post messages on Twitter to try to lower the stock price, hoping to renegotiate and reduce the purchase price or even withdraw from the deal altogether.

Plaintiffs’ lawyers claimed Musk’s tweets were not accidental “slips” or “stupid acts,” but carefully planned efforts to depress Twitter’s stock price.