Elon Musk Testifies in Twitter Shareholder Lawsuit Over Alleged Stock Manipulation

In a San Francisco courtroom on Wednesday, Elon Musk took the stand in a shareholder lawsuit that alleges he deliberately manipulated Twitter’s stock price before completing his $44 billion acquisition of the social media platform in 2022.

The lawsuit, filed in October 2022 in the U.S. District Court for the Northern District of California, represents Twitter shareholders who sold their stock between May 13 and October 4, 2022. Plaintiffs claim Musk violated federal securities laws by making false public statements that were “carefully calculated to drive down the price of Twitter stock” ahead of his purchase.

The controversy centers around Musk’s behavior after initially agreeing to buy Twitter in April 2022. On May 13, Musk tweeted that his plan was “temporarily on hold” while he sought to determine the number of spam and fake accounts on the platform. The announcement sent Twitter’s stock tumbling nearly 10% that day. Soon after, he tweeted that the deal “cannot go forward” and claimed nearly 20% of Twitter accounts were “fake.”

During questioning by plaintiff’s attorney Aaron P. Arnzen, Musk, dressed in a black suit and tie, defended his statements. When asked about the impact of his “temporarily on hold” tweet, Musk compared it to “saying you’re going to be late for a meeting. (It doesn’t) mean you are not going to be at the meeting.” He repeatedly insisted he was “simply speaking my mind” when questioned about whether he considered how his tweets would affect the stock market.

The lawsuit contends that Musk’s claim about putting the deal “on hold” was false because Twitter never agreed to pause the acquisition, and the merger agreement they signed contained no provision allowing for such a delay.

Musk also faced questions about his earlier stock purchases. He testified that he didn’t consider it “material” when he began acquiring Twitter shares in early 2022 without disclosing this to the Securities and Exchange Commission or tweeting about it. Once his ownership position became public, Twitter’s stock jumped 27% in a single day.

In the weeks following his “on hold” tweet, Musk continued attempting to delay or exit the deal. In July 2022, he announced he would abandon his offer, citing Twitter’s failure to provide sufficient information about fake accounts. The stock closed at $36.81 on July 8 when Musk tweeted about abandoning the deal—32% below his original offer price of $54.20 per share.

Notably, Musk had waived due diligence for his “take it or leave it” offer, effectively relinquishing his right to examine Twitter’s nonpublic finances. When asked if he had inquired about Twitter’s methodology for calculating fake accounts before waiving due diligence, Musk admitted he had not but assumed the company’s SEC filings would be accurate. “It subsequently turned out they misrepresented the number of bots,” he claimed. “They lied.”

The bot issue wasn’t new to Twitter. In 2021, the company paid $809.5 million to settle claims it had overstated growth rates and user figures. Twitter had also disclosed its bot estimates to the SEC for years, while acknowledging its estimates might be too low.

Twitter ultimately sued Musk to force completion of the deal, and he countersued. By October 4, Musk offered to proceed with his original $44 billion proposal, which Twitter accepted. The acquisition closed later that month, after which Musk drastically reduced the workforce, dismantled the trust and safety team, and rolled back content moderation policies. In July 2023, he rebranded Twitter as X.

This isn’t Musk’s first legal battle over alleged market manipulation. Three years ago, he testified for about eight hours in another San Francisco federal trial regarding statements about potentially taking Tesla private at $420 per share—a deal that never materialized. In that case, a jury found Musk not liable.

The current trial continues as shareholders seek damages for losses allegedly incurred due to Musk’s statements during the tumultuous acquisition process.