SAN FRANCISCO (CN) — Elon Musk defrauded Twitter investors in his $44 billion buyout of the social media platform in 2022, a San Francisco jury found Friday.
Investors, including lead plaintiffs Steve Garrett, Nancy Price, John Garrett and Brian Belgrave, sued Musk in October 2022 over claims they suffered major losses when Musk deliberately made misleading statements about the presence of spam bot accounts on Twitter to drive down the company’s stock, in hopes of backing out of the acquisition deal or renegotiating more favorably for himself.
The statements at issue include a tweet from May 13, 2022, where Musk said the Twitter deal was on hold “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” A couple hours later, Musk followed up with another tweet saying he was “still committed to acquisition.”
In addition to the tweets, Musk said in a May 16 comment at a conference that fake and spam accounts made up at least 20% of Twitter users at the time, and tweeting a poop emoji when then-Twitter CEO Parag Agrawal commented there was no way for external parties to calculate this information.
Musk reiterated his beliefs in a tweet the next day, writing that the deal was “based on Twitter’s SEC filings being accurate" and would not be moving forward until Agrawal provided evidence of bot numbers under 5%.
Twitter ultimately sold to Musk for $54.20 per share, only closing after the company sued Musk to force the deal to go through.
After deliberating for four days, the jury unanimously found Musk’s May 13 and May 17 tweets were materially false or misleading but did not hold him liable for his May 16 comments. They also rejected the plaintiffs’ scheme claims against Musk.
Still, the jury opted to award damages per share of Twitter stock for each day of the class period, from May 13, 2022, to Oct. 3, 2022. They additionally awarded damages per Twitter stock option for each day of the class period.
In total, attorneys for the plaintiffs estimate damages could top $2.6 billion.
“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 it,” Mark Molumphy of Cotchett, Pitre & McCarthy, an attorney for the investors, told Courthouse News after the verdict was read.
He continued: “It’s important, at this moment, we’re just a few blocks away from where Twitter operated, to recognize that Twitter was an important institution in San Francisco, and it was not a sham. It was a real company, and the way [Musk] dragged it through the mud in order to basically get a better deal was atrocious.”
Musk’s legal team said in a statement he intends to appeal the decision.
“We view today’s verdict, where the jury found both for and against the plaintiffs and found no fraud scheme, as a bump in the road. And we look forward to vindication on appeal,” they said.
The investors claim Musk knew about the prevalence of spam accounts on Twitter before he purchased the platform and deliberately rushed through the dealmaking process to make his offer more attractive, skipping traditional steps intended to give buyers more information on a company.
They claim the billionaire only began to second-guess the deal because of issues he ran into selling shares of Tesla stock to pay for the acquisition, and deliberately made a series of false or misleading comments about Twitter’s bot counts to hurt the company’s stock price.
During the two-week trial, the eight-person jury heard testimony from former senior leaders at Twitter, bankers from Morgan Stanley and Goldman Sachs involved in the transaction, and lawyers who represented both Musk and Twitter during the acquisition.
Musk himself took the stand on March 4, telling the jury that he had real concerns over the presence of bots on Twitter and did not intentionally drive down Twitter’s stock price.
In closing arguments, Molumphy compared Musk’s commitment to the case to his conduct during the acquisition.
“In 2022, after signing a binding agreement, Mr. Musk proposed and promised to use his best efforts to get the deal done. Musk decided just weeks later that he didn’t want to pay investors what he promised to pay. The deal in his mind had gotten too expensive,” he said.
“So, he did here what he did on the stand, he trashed the executives, he trashed the company, he trashed the stock, then he fled the scene, never to be seen again.”
In contrast, Musk’s attorney, Michael T. Lifrak of Quinn Emanuel, argued Musk couldn’t have defrauded investors because the issue of spam and bot accounts on Twitter was a genuine concern of his for years before the acquisition deal took place.
“At the end of the day, look at all the evidence that this was a legitimate concern, that this was not fraud. What did they show you that this bot thing was made up? This was real, this was right,” he told the jury.
Both parties additionally asked the jurors to consider all the evidence before making their ruling, regardless of their opinions of Musk.
“In this case, you shouldn’t allow any person, no matter how powerful, how rich, how influential, to say whatever he wants, whenever he wants, and not be held accountable,” Molumphy said.
“When someone is standing trial that does things like stupid tweets, does things you may not like, does things you may hate, that is when the justice system matters most,” Lifrak said.
U.S. District Judge Charles R. Breyer, a Bill Clinton appointee, presided over the trial.
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