By Emmanuel Nduka Obisue
A U.S. jury has ruled that billionaire entrepreneur Elon Musk misled investors during the turbulent period leading up to his $44 billion acquisition of Twitter, potentially exposing him to billions in damages.
The verdict, delivered in a federal court in San Francisco, found Musk liable for making misleading statements that influenced shareholder decisions, though the jury did not conclude that he orchestrated a deliberate scheme to defraud investors.
Background of the Class-Action Lawsuit
The case arose from a class-action lawsuit filed by Twitter shareholders who alleged that Musk manipulated the company’s stock price through public statements, including posts on Twitter itself.
Central to the case were Musk’s tweets from May 2022, particularly one stating the acquisition deal was “temporarily on hold” pending clarification on the number of fake accounts on the platform.
Jury Findings and Damages
After nearly three weeks of hearings and four days of deliberations, the nine-member jury concluded that two of Musk’s tweets misled investors, prompting some to sell shares at depressed prices. Remarks he made during a podcast were considered opinion rather than actionable misrepresentation.
The court awarded estimated damages of $3 to $8 per share per day, totaling roughly $2.6 billion when factoring in stock and options, according to plaintiffs’ lawyers.
“This is a significant win for investors and a warning to influential figures in the financial markets,” said plaintiffs’ attorney Mark Molumphy.
Musk’s Legal Team Reacts
Musk’s legal team downplayed the ruling, noting that the jury rejected key fraud allegations. They signaled plans to appeal, framing the decision as a temporary setback.
Controversy Over Twitter’s Fake Accounts
A major point of contention was Musk’s claim that Twitter underreported bots and spam accounts. Musk argued the 5% estimate was inaccurate and used it as grounds to reconsider or even withdraw from the deal, sparking legal battles with Twitter in Delaware.
Ultimately, Musk proceeded with the acquisition at the original price shortly before trial. During testimony, he maintained that the company’s leadership failed to provide reliable data on fake accounts.
Impact on Stock Price and Investor Losses
Evidence presented in court showed Twitter’s stock price fell below $33 per share during the period of uncertainty, significantly lower than Musk’s agreed purchase price. Shareholders argued that Musk’s statements caused substantial financial losses.
While Musk insisted he could not control investor behavior, plaintiffs contended his tweets were strategically intended to drive down the stock price, potentially allowing him to renegotiate or exit the deal.
Legal Implications and Industry Insight
Legal analysts say the ruling highlights the growing influence of social media statements on financial markets. Independent lawyer Monte Mann noted that powerful individuals can move markets with a single post and face legal consequences.
This is not Musk’s first legal scrutiny over tweets. In a separate Tesla case, he was cleared of misleading investors. Nevertheless, the latest verdict indicates courts are increasingly willing to hold high-profile executives accountable for market-moving statements in the era of instant digital communication.
