X owner Elon Musk will have to pay former Twitter shareholders as much as $2.6 billion in damages after a jury in California found that Musk deliberately attempted to manipulate the company’s share price with his public statements ahead of his 2002 purchase of the platform.
As reported by Bloomberg, on Friday a federal jury in San Francisco found that Musk intentionally misled Twitter shareholders when he tweeted that the social network had more fake accounts than it had publicly reported, as part of an effort to back out of his proposed $44 billion takeover deal.
Twitter had long held that the number of fake profiles in the app didn’t exceed 5% of its total mDAU count, based on its own sampling. However, Musk claimed that it was actually much more, saying his own research and analysis put that number at around 33% of its active profiles being fakes.
Musk eventually said it was a more modest 20%, while adding in a Twitter post that it was likely much higher. Musk also claimed that his proposed takeover could not move forward unless Twitter showed proof of its claims.
The class action lawsuit was first filed in October 2022.
On Friday, the jury found that Musk’s comments depressed Twitter’s share price and prompted some investors to sell their stock. The jury found that Musk’s statements constituted an effort to reduce Twitter’s value. In addition, the jury found Musk liable for misleading Twitter shareholders within the process. Musk will now be ordered to repay these shareholders an equivalent amount of loss, the cumulative value of which could reach as high as $2.6 billion.
Lawyers for Musk have vowed to appeal the finding.
It’s another case of Musk’s public tweets/posts prompting legal action, with his influential position enabling him to sway market sentiment.
Though Musk also has a history of challenging and winning such rulings.
In 2019, the BBC reported that Musk won a defamation case brought by cave explorer Vernon Unsworth, after Musk seemingly labeled Unsworth a “pedo” in a tweet relating to the rescue of 12 boys trapped in a cave in Thailand. As per the BBC, the case was considered a significant test of the legal threshold for defamatory material on social networks.
As reported by CNN, Musk faced similar legal action after a 2018 tweet, in which he noted that he was considering taking Tesla private after securing funding from investors. Musk won a subsequent shareholder lawsuit that claimed he had manipulated Tesla’s stock price with his comments.
As such, it’s no surprise that Musk’s legal team will seek to overturn the verdict. A successful challenge could help him avoid a significant fine.
An appeal date will be set in future.
