Elon Musk Liable for Misleading Twitter Shareholders – $2.6B Damages Possible
- A California jury has found Elon Musk liable for misleading investors regarding Twitter, now known as X, prior to his $44 billion acquisition of the social media platform...
- Musk, centered on Musk’s public statements about the number of bot and spam accounts on Twitter.
- While the jury determined that Musk misled investors, they did not find evidence of a specific scheme to defraud them, according to a statement from Musk’s legal team...
Musk Found Liable for Misleading Twitter Investors, Facing Billions in Potential Damages
A California jury has found Elon Musk liable for misleading investors regarding Twitter, now known as X, prior to his $44 billion acquisition of the social media platform in 2022. The verdict, reached on , could result in Musk owing as much as $2.6 billion in damages to former Twitter shareholders, according to attorneys representing the plaintiffs.
The lawsuit, Pampena v. Musk, centered on Musk’s public statements about the number of bot and spam accounts on Twitter. After initially pursuing the acquisition, Musk expressed doubts about the company’s reported user metrics, suggesting the platform had significantly more automated accounts than disclosed. This led him to attempt to renegotiate the purchase price, and to briefly try to back out of the deal altogether. Investors alleged that these actions were a deliberate attempt to drive down Twitter’s stock price.
While the jury determined that Musk misled investors, they did not find evidence of a specific scheme to defraud them, according to a statement from Musk’s legal team at Quinn Emanuel. The jury’s finding of liability stems from Musk’s tweet announcing the deal was “temporarily on hold,” which caused a nearly 10% drop in Twitter’s share price, as reported by Deadline.com.
Joseph Cotchett, representing the former shareholders, emphasized the broader implications of the case. “This is a great example of what you cannot do to the average investor — people that have 401ks, kids, pension funds, teachers, firemen, nurses,” Cotchett told CNBC outside the San Francisco courthouse. “That’s what this case was all about. This was not about Musk. It was about the whole operation.”
The acquisition of Twitter was completed in October 2022, with Musk ultimately paying the originally agreed-upon price of $54.20 per share. Following the purchase, Musk rebranded the platform as X and subsequently merged it with his artificial intelligence company, xAI, and his space exploration venture, SpaceX. The financial strain of the acquisition led Musk to sell approximately $4 billion worth of Tesla stock in the weeks following the deal’s closure.
The case highlights the risks associated with high-profile acquisitions and the potential for significant financial repercussions when public statements are perceived as misleading. Musk’s attorneys have indicated their intention to appeal the verdict, framing it as “a bump in the road.” The determination of the final damages amount will occur in the coming weeks, as reported by the New York Times.
Investors will be closely watching the appeal process and the final damage assessment. This case sets a precedent for accountability regarding public statements made during major corporate transactions and underscores the importance of transparency in communications with shareholders. The outcome could influence future acquisition strategies and the level of scrutiny applied to public pronouncements by corporate leaders.