A Californian jury has found that Elon Musk misled investors before his $44 billion takeover of Twitter in 2022, as reported by the BBC. Musk had testified he did not believe his tweets were misleading, but conceded, "If this was a trial about whether I made stupid tweets, I would say I'm guilty." Sometimes the headlines write themselves.
The jury found that, while Musk did not deliberately set out to defraud shareholders, two of his tweets from 2022 were materially false or misleading, and caused some investors to sell shares at below the eventual $54.20 per share that Musk paid for the social media company. The tweets in question are from May 13th and May 27th, 2022, and read as follows:
May 13th, 2022: Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users
May 27th, 2022: 20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.
Musk attempted to back out of an agreement to buy Twitter in July 2022, flinging some wild accusations at Twitter's then-leadership as he did so, but after several months of legal back-and-forth he purchased the company for his original offer price in October that year. He soon renamed the company X, merged it with his artificial intelligence company xAI, and then with SpaceX.
This class action lawsuit (Pampena v. Musk) was filed shortly afterwards by various investors, who claimed that Musk had been deliberately trying to drive down the share price in order to force a renegotiation of the $44 billion price tag. Lawyers for the group claimed that posts like the above made shareholders sell at a much lower price than they would have received, had they retained their shares until the deal was complete.
"Elon Musk cheated investors to save himself billions of dollars," said Aaron Arnzen, representing the investors, adding that Musk wanted to "trash Twitter with his personal megaphone, his Twitter account, punish the stock and try to renegotiate."
"This is a great example of what you cannot do to the average investor, people that have 401ks, kids, pension funds, teachers, firemen, nurses," said attorney Joseph Cotchett. "That's what this case was all about. This was not about Musk. It was about the whole operation."
CNBC reports that Musk's attorneys will file an appeal, with damages potentially reaching as much as $2.6 billion. This figure is based on estimates of how much Musk's comments affected Twitter's share price, with the jury finding his remarks had artificially lowered the price of the company's stock by between $8 and $3 a share. Musk's representation has declined to comment. Bloomberg estimates that Musk's net worth is around $650 billion.
Brian Belgrave, who led the class action, told the court that he had sold thousands of shares in July 2022, under the belief that Musk would not proceed with purchasing the social media platform. He sold them for significantly less than the $54.20 per share that Musk eventually paid.
"I got screwed," Belgrave told the jury. "I got cheated."
