Musk Liable for Defrauding Twitter Investors Over Bot Claims, Jury Finds
Elon Musk found liable for defrauding Twitter investors in 2022.
Top Summary
- What happened: A jury found Elon Musk liable for defrauding Twitter (now X) investors in 2022 by disparaging the company to lower its purchase price.
- Why it matters: The verdict could result in billions of dollars in damages and impacts investor trust in Musk's statements.
- What changes for people: Shareholders who traded based on Musk's statements in May 2022 may receive compensation.
- Who is affected: Twitter (X) investors, Elon Musk, and potentially future acquisitions involving Musk.
The Verdict
A federal jury in San Francisco has found Elon Musk liable for defrauding Twitter (now X) investors.
The lawsuit stemmed from Musk's efforts to lower the purchase price of the platform in 2022.
Key Allegations
Jurors concluded that Musk intentionally misled shareholders by claiming the social media company had an excessive number of fake accounts.
He made these claims while attempting to withdraw from his $44 billion acquisition deal.
However, the court absolved him of some fraud allegations, adding that he did not "scheme" to mislead investors.
Tweets and Podcast Comments
The jury examined two tweets and podcast comments Musk made in May 2022.
They focused on whether these constituted intentional fraud against shareholders who traded based on his statements.
After three days of deliberations, the nine-member jury concluded that Musk misled investors through two tweets.
- One stated the deal was "temporarily on hold".
The jury found that he did not do so via his podcast remarks and did not engage in a deliberate scheme to defraud.
Damages Expected
The verdict came nearly three weeks after the trial began on March 2.
While damages in the class-action case remain to be finalised, they are expected to run into billions of dollars.
The jury awarded shareholders between about $3 and $8 per share per day.
Fake Account Claims
Much of the case focused on Musk's claims regarding the number of fake accounts on Twitter.
He argued that the platform had significantly more bots and spam accounts than the roughly 5% disclosed in regulatory filings.
He used this as grounds to attempt to withdraw from the $44 billion deal.
Acquisition Reversal
After Musk sought to back out, Twitter filed a lawsuit in Delaware to enforce the agreement.
Just before the case was set to go to trial, Musk reversed course and agreed to proceed with the acquisition on the original terms.
What to Watch Next
The court will now determine the final amount of damages Musk must pay to affected shareholders. Further legal challenges from either side are possible.