- U.S. jury finds Elon Musk liable in Twitter shareholder lawsuit
- Case relates to 2022 statements about bot accounts on platform
- Shareholders allege statements lowered stock price during takeover negotiations
- Damages not set, lawyers estimate potential liability near $2.5 billion
A federal jury in the United States has declared Elon Musk liable to defraud the Twitter shareholders over claims that he made when acquiring the social media company in a $44 billion deal, which was a major blow to the billionaire entrepreneur.
The decision, which was issued in a federal court in San Francisco, found Musk guilty of misleading the public with false claims about the number of fake and spam accounts on Twitter in 2022. Reuters reported that the jurors found two of the statements made by Musk to have caused damage to the investors by affecting the price of the stocks of the company during the acquisition.
The damages are still not finalized yet, however, the shareholder attorneys stated that there is a possibility of damages in billions of dollars. According to Reuters, estimates in the trial indicated damages of about 2.5 billion.
The case focused on arguments that Musk sought to renegotiate or back out of the deal by publicly doubting the number of users to the platform, which placed a downward pressure on the share price of the company.
Liability Finding on Important Statements
The jurors paid attention to three statements made by Musk soon after accepting to buy Twitter in April 2022. They deemed him culpable of 2 of them, one of which said that the deal was put on hold temporarily until they could confirm that the proportion of bots to the user base was less than 5% of the total.
A separate statement by the jury indicated the possibility of the percentage of fraudulent accounts being much larger, which cast the prospects of the acquisition process going forward on the initial conditions into some doubt. These statements, the shareholders claimed, brought about confusion in the market and the share price of Twitter saw a fall.
Francis Bottini, one of the lawyers representing the shareholders, said "Musk was not an exception as he is the richest man in the world". "When you can perform stock trading with your tweets you are the one who causes the damage to the investors".
The jury however failed to see enough evidence to back a wider charge that Musk was involved in an organized conspiracy to defraud investors.
The legal team of Musk indicated that it was going to appeal the decision. His lawyers announced in a common statement that the verdict was just a hitch on the way. And we anticipate a victory on appeal.
The verdict was "a bump in the road. And we look forward to vindication on appeal," Musk's lawyers said in a joint statement.
Market Impact And Law Implication
Investors who alleged to have sold Twitter shares at inflated prices between May and October 2022 were covered by the lawsuit which was filed at a time when the volatility was high as Musk publicly discussed the extent of bots on the platform.
In October 2022, Musk finally acquired it and changed the name of the company to X. The case is a continuation of high-profile legal battles between Musk and claims of shareholders.
According to market participants, the ruling highlights the financial and legal implications of the public utterance that influential executives can make especially when they are in a position to sway markets.
According to the data provided by Reuters, Tesla stock, which is frequently sensitive to the events associated with Musk, did not change significantly in the long-term trading as compared to the last session which could indicate that there were few spillover effects on the larger equity markets.
Greater Legal Objections Are Still in Progress
The decision is reached in the circumstances of continued questioning of the business transactions and disclosures of Musk. He is also in negotiations to resolve a lawsuit in the United States with the Securities and Exchange Commission concerning his disclosures of the time of purchasing shares of Twitter in 2022.
Musk has had to deal and successfully defend such claims before. In 2023, he prevailed in a lawsuit that claimed he defrauded Tesla shareholders by saying that their funding is secured in a statement about a possible privatisation of the electric vehicle company. Another area that he has won in litigation is with regard to his compensation package.
Even after the recent decision, experts indicate that the appeal procedure might be lengthy and affect the ultimate financial effect of the case.
The ruling underscores the increased convergence between corporate governance, market communication and legal responsibility in a time where executive utterances can swiftly manipulate investor actions and share worth.
