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Closing arguments concluded Tuesday in a high-stakes trial where Twitter shareholders accuse Elon Musk of deliberately misleading investors during his tumultuous $44 billion acquisition of the social media platform in 2022.
Eight jurors will now determine whether the world’s richest man committed securities fraud through his public statements and tweets as he attempted to back out of the deal before ultimately completing the purchase.
The San Francisco civil trial centers on a class-action lawsuit filed just before Musk took control of Twitter, which he later renamed X, in October 2022. Musk had agreed to buy the company for $44 billion, or $54.20 per share, six months earlier—a fraction of his estimated $837 billion fortune.
At the core of the legal dispute is Musk’s claim that Twitter significantly misrepresented the number of fake and spam accounts on its platform. Musk testified that Twitter had far more bots than the 5% disclosed in regulatory filings, which he cited as justification for attempting to withdraw from the purchase.
The case follows a complex timeline of events. After Musk initially tried to back out, Twitter sued him in Delaware court to enforce the original agreement. Facing an imminent trial, Musk reversed course and completed the acquisition at the originally agreed price.
Mark Molumphy, representing the shareholders, urged jurors to hold Musk accountable for tweets that allegedly manipulated Twitter’s stock price, particularly a May 13, 2022, post declaring the deal was “on hold.”
“He knew what he was doing,” Molumphy told the court. The plaintiffs contend that as Tesla’s stock price declined, making the Twitter acquisition more financially burdensome, Musk deliberately tweeted statements designed to drive down Twitter’s stock price to either renegotiate for less or escape the agreement entirely.
The plaintiffs’ attorney characterized Musk’s tweets not as innocent mistakes but as calculated moves to manipulate Twitter’s stock valuation.
Michael Lifrak, Musk’s attorney, vigorously disputed these claims, arguing that the plaintiffs presented “not one shred of evidence” showing Musk intentionally plotted to lower Twitter’s stock price. He reminded jurors that even establishing motive and intent isn’t sufficient to prove fraud occurred.
“You can’t just say he wanted a lower price and therefore he committed fraud,” Lifrak argued, dismissing claims that Tesla’s stock decline during the acquisition period motivated Musk’s behavior.
The controversy surrounding Twitter’s bot accounts predated Musk’s involvement. The company had previously paid $809.5 million in 2021 to settle claims of overstating growth and user figures. Twitter had also regularly disclosed its bot estimates to the Securities and Exchange Commission while cautioning that its figures might be understated.
Musk, however, insisted the actual bot percentage was “at least 20%” according to some analysts—a figure he compared to obvious facts like “the grass is green or the sky is blue.” This claim was contradicted by Twitter’s former CFO Ned Segal, who testified that the real number was closer to 1%.
During cross-examination, Segal acknowledged that Twitter once restated its finances after discovering a calculation error in daily user numbers. In 2017, the company admitted to overstating monthly user figures by mistakenly including users from a third-party app.
Molumphy presented evidence of Musk’s skepticism about Twitter’s user numbers even before the acquisition, showing tweets from 2020 where Musk complained about fake accounts. He also highlighted Musk’s trial testimony where, when asked if he believed Twitter was “exaggerating” user numbers before signing the deal, Musk replied, “Yes.”
Defending the pivotal May 13 “on hold” tweet, Lifrak used visual aids to argue no one had characterized it as false either at the time it was posted or during the trial. He also addressed potential bias against his client, urging jurors not to “fall for a San Francisco us vs. Elon Musk dynamic.”
“He may tweet stupid things,” Lifrak conceded, “but this isn’t a stupid tweeter trial. It’s a trial on whether this man committed securities fraud and whether they proved it—and they didn’t.”
Judge Charles R. Breyer acknowledged during jury instructions that many potential jurors held negative views of Musk, but emphasized that a person who is “not universally liked” deserves a fair trial without discrimination or prejudice.
Musk, apparently unconvinced of receiving fair treatment, filed a motion for mistrial earlier this month, claiming the plaintiffs’ conduct—and sometimes the judge’s—had deprived him of his right to a fair proceeding.
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10 Comments
As an investor, I’ll be watching this case closely. It raises important questions about the responsibilities of company leaders and the reliability of information provided to shareholders.
This case highlights the complexities of high-stakes acquisitions and the importance of transparency. It will be interesting to see how the jury weighs the arguments and evidence on both sides.
The legal battle between Musk and Twitter shareholders is a high-profile case that could have broader implications for how companies disclose information during M&A transactions.
This is a complex case with a lot of nuance. I hope the jury is able to carefully weigh the evidence and reach a fair conclusion, regardless of Musk’s fame and wealth.
Musk’s claims about Twitter’s bot problem seem to be at the heart of this dispute. I’m curious to see if the shareholders can prove he deliberately misled investors.
Indeed, the accuracy of Twitter’s user metrics is a key issue. The jury will likely scrutinize the evidence carefully to determine if Musk acted in bad faith.
Musk’s behavior throughout this process has been controversial, to say the least. I’m curious to see if the shareholders can prove he acted with intent to mislead.
Absolutely. The jury will have to determine if Musk’s public statements and actions crossed the line into securities fraud. This case could have lasting impacts.
The outcome of this trial could set an important precedent for how companies must handle disclosures and communications during major acquisitions. It’s a high-stakes situation.
Given Musk’s wealth and influence, this trial has drawn a lot of attention. I hope the legal process can shed light on the facts, regardless of the parties involved.