Elon Musk defends tweets in lawsuit alleging they caused Twitter stock to fall before acquisition

Elon Musk defended his actions leading up to his 2022 Twitter acquisition in a San Francisco courtroom Thursday, as he battles a class action lawsuit alleging he deliberately misled investors and caused significant financial losses.

The billionaire entrepreneur continued his testimony in the civil trial which focuses on allegations that he violated federal securities laws during his $44 billion takeover of the social media platform, which he later renamed X.

The lawsuit represents Twitter shareholders who sold their stock between May 13 and October 4, 2022. Plaintiffs claim Musk engaged in a calculated strategy to drive down Twitter’s share price, either to cancel the deal entirely or to negotiate a lower purchase price than the agreed $54.20 per share.

Central to both Musk’s defense and the lawsuit is the contentious issue of bot accounts on the platform. During his second day of testimony, Musk doubled down on his assertion that Twitter significantly underreported the prevalence of fake and spam accounts in its regulatory filings.

“The number was much higher, at least 20%,” Musk testified, describing this assessment as self-evident as “saying the grass is green or the sky is blue.” This directly contradicts Twitter’s long-standing disclosure that fake accounts represented approximately 5% of its user base.

The dispute over bot accounts has become the cornerstone of the case. Twitter had previously acknowledged challenges with accurate user metrics, having paid $809.5 million in 2021 to settle claims it overstated growth and monthly user figures. The company had routinely disclosed its bot estimates to the Securities and Exchange Commission while cautioning that its 5% figure might be conservative.

Following Musk’s relatively brief testimony, the court heard from expert witnesses and Twitter’s former CEO Ned Segal, whose account sharply contradicted Musk’s claims. When asked if Twitter had ever filed false SEC disclosures regarding spam account numbers, Segal firmly denied such allegations.

In a surprising counterclaim, Segal testified that the actual bot rate was “closer to 1%” rather than the 5% publicly disclosed or the 20% Musk alleged. This directly challenges Musk’s assertion from Wednesday’s testimony that Twitter “lied” about its bot numbers.

Segal did acknowledge that Twitter had previously made reporting errors requiring correction. In 2017, the company admitted to overstating its monthly user numbers due to mistakenly including users from a third-party app, which prompted a restatement of its metrics.

The trial has highlighted the contentious nature of Musk’s Twitter acquisition, which was marked by public disputes, attempted withdrawal, and eventual completion at the original price. Musk’s purchase of the platform for $44 billion in October 2022 came six months after his initial agreement, following legal pressure to honor the deal.

The case underscores broader issues in tech acquisitions and corporate disclosures, particularly regarding user metrics that directly impact valuation. For social media companies, accurate reporting of genuine users versus automated accounts remains a critical factor in determining advertising revenue potential and overall platform value.

The outcome of this trial could set precedents for how executives communicate during high-profile acquisitions and the extent of their liability when public statements affect market prices. For Musk, who has faced regulatory scrutiny for previous market-moving statements, the case adds another chapter to his complicated relationship with securities regulations.

As the trial continues, investors and legal observers are closely monitoring how the court will interpret Musk’s statements and actions during the tumultuous acquisition process, and whether they constituted deliberate market manipulation as alleged by the shareholders.