A US federal jury in California on Friday found that world’s richest billionaire Elon Musk liable for claims that he misled Twitter shareholders by trying to pull down the social media company’s share price so he could renegotiate or back out of a $44 billion deal in 2022. The jury, however, absolved him of charges that Musk was engaged in a “scheme” to defraud investors.
The civil trial in San Francisco saw jurors in the federal court agreeing that Musk intentionally misled Twitter shareholders by posting two tweets and saying on a podcast in May 2022 that Twitter had too many fake accounts, and tried to back out of the deal.
The jury decided that this was intentionally done to defraud Twitter shareholders, who sold their shares based on Musk’s statements.
What were the charges against Elon Musk?
The class-action lawsuit was filed just before Elon Musk took control of Twitter in the $44 billion deal, which he later renamed X.
While the jury rejected two out of the total fraud claims, the billionaire’s lawyers vowed to appeal.
Musk was accused of falsely claiming on social media that Twitter underreported how many fake and spam accounts, known as bots, were on its platform.
Shareholders of Twitter challenged three statements Musk made not long after agreeing in April 2022 to buy Twitter. The jurors found him responsible for two out of the three statements.
One of the statements said that the purchase of Twitter was “temporarily on hold” pending confirmation that bots represented less than 5% of users. The other said the percentage of bots could be “much” higher than 20%, and the takeover could not go forward unless Twitter’s chief executive proved the percentage was less than 5%.
The jurors heard about two weeks of live testimony from Musk and top Twitter executives at the time.
The former Twitter executives narrated how the company suffered turbulences for a period of six months in 2022 when the billionaire flip-flopped over whether he would buy the platform, resulting in a court battle that ultimately made him follow through his promise.
$2.6 billion in damages
Twitter investors are likely to be eligible to get an amount of $2.6 billion in damages following the verdict, according to Mark Molumphy, a lawyer for the investors.
However, an award that high is unlikely to put much dent on Elon Musk’s net worth, which as per Bloomberg Billionaires Index stood at $661.1 billion on Friday.
The jury awarded shareholders between about $3 and $8 per stock per day as damages.
Breaking down the verdict, the plaintiff’s lawyers said that the damages amount to about $2.1 billion in stock and another $500 million in options.
“It’s an important victory, not just for investors of Twitter, but for the public markets,” said Joseph Cotchett, 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.”
- Elon Musk was found liable for misleading statements that affected Twitter shareholders.
- The jury’s decision underscores the importance of accountability in financial markets.
- Potential damages awarded to investors highlight the financial repercussions of deceptive practices.
