California jury rules Musk intentionally misled Twitter investors

A civil jury in California ruled on Friday that Elon Musk intentionally misled Twitter investors when he attempted to back out of his $44 billion acquisition of the social media platform in 2022. During the acquisition process, Musk sought to delay or halt the deal by publicly questioning the platform’s metrics regarding spam and fake accounts. Specifically, Musk posted on the platform, which has since been rebranded as X: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users”. The ruling establishes that Musk used these public statements to intentionally mislead Twitter investors.

The lawsuit was filed by investor Giuseppe Pampena on behalf of former Twitter shareholders who sold their stock between May 13 and October 4, the day the acquisition was finalized. Following Musk’s post on May 13, Twitter shares experienced an 8% decline. According to Pampena’s lawsuit, Musk intentionally posted about his concerns with Twitter to create uncertainty about the platform’s stability to artificially drive down its stock price. This artificial depression of the stock price allegedly caused significant losses for investors who sold their shares during that specific window. While Musk’s legal team argued that the executive was merely expressing legitimate concerns about the prevalence of bots on the application, the California jury ultimately rejected this defense.

This verdict represents a stark contrast to Musk’s previous high-profile legal battles over his social media activity. In 2018, the SEC—the US Securities and Exchange Commission—charged Musk with securities fraud after he posted that he had ‘funding secured’ to take Tesla private at $420 per share. Although Musk eventually emerged victorious in a subsequent shareholder lawsuit concerning the 2018 Tesla statements, the California jury in this Twitter case reached the opposite conclusion, marking a courtroom defeat for the billionaire regarding his public communications.

The financial consequences of the verdict are still being determined, but Pampena’s attorney stated that damages could reach up to $2.6 billion. While a multi-billion-dollar penalty is substantial, it represents a fraction of Musk’s total wealth, with his net worth estimated at over $660 billion. The legal setback comes as Musk continues to consolidate his companies. After acquiring Twitter and rebranding it as X, Musk merged the platform with his artificial intelligence venture, xAI, yielding a combined company valuation of $113 billion. More recently, SpaceX merged with xAI.

Why it matters

This ruling marks a significant legal defeat for Musk regarding his public statements, potentially setting a precedent for how executive social media activity impacts shareholder value and market stability.