Elon Musk has been found liable by a federal jury in San Francisco for misleading Twitter shareholders during his $44 billion takeover of the social media company, now known as X. The case focused on Musk’s statements in May 2022, including a tweet claiming the deal was ‘temporarily on hold’ and remarks questioning the number of fake accounts on Twitter. Investors argued that these statements caused the stock to drop and prompted some shareholders to sell at a loss. Importantly, the verdict does not accuse Musk of planning an overall fraud scheme.
The lawsuit, filed as a class-action by Twitter investors, centered on how Musk’s public communications during the acquisition negotiations affected the company’s share price. Plaintiffs argued that by casting doubt on Twitter’s reported user metrics and announcing a pause in the deal, Musk created uncertainty that materially harmed shareholders who sold their stock during the resulting price swings. The jury agreed that at least two of Musk’s statements were misleading, making him liable for the financial impact on these investors.
Financially, the jury’s verdict could lead to significant damages. Estimates suggest that Musk could face more than $2 billion in liability, though the exact amount will be determined in a later phase of the proceedings. This potential payout would compensate shareholders who sold stock at depressed values due to the market reaction to Musk’s statements. While Musk remains one of the wealthiest individuals in the world, with a net worth exceeding $200 billion, a multi-billion-dollar liability in a civil case of this kind is still notable for its scale and precedent-setting nature.
Meanwhile, Musk’s legal team has signaled that it intends to appeal the verdict. They argue that Musk’s comments reflected genuine concerns about Twitter’s user metrics and were not intended to manipulate the market and mislead shareholders. However, it is important to note that appeals are common in complex, high-stakes civil litigation and could take months or even years to resolve, leaving the final outcome uncertain.
This is not the first time Musk has faced trouble due to his public statements. He has encountered legal challenges before for comments made on social media. For example, in 2018, he paid a $20 million fine and stepped down as Tesla’s chairman after tweeting about taking Tesla private with ‘funding secured’, which led to a settlement with the US Securities and Exchange Commission without an admission of wrongdoing.
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