US District Judge Charles Breyer in San Francisco has officially denied Elon Musk's attempt to overturn a shareholder litigation ruling regarding his 2022 takeover of Twitter. According to reports from Reuters, the federal court rejected Musk's effort on Monday to void a jury verdict that found the world's richest person had defrauded Twitter investors by trying to drive down the social media company's stock price after agreeing to a $44 billion takeover. The judge also denied Musk's motion to decertify the class of investors and granted the investors' motion for prejudgment interest, providing additional financial relief to the plaintiffs. As reported by Reuters, Judge Breyer wrote that "Even if the speaker has a change of heart or a momentary regret about a transaction, such qualms do not justify lying to the investing public." The judge also rejected Musk's claim that jurors were biased against him, noting that they deliberated over nearly four days and sided with Musk on some claims, calling it "defies common sense" that jurors were biased against him.
While the court provided some relief to Musk on specific claims, the overall verdict remains intact. As reported by Reuters, Judge Breyer concluded that Elon Musk was not responsible for one of his contested tweets during the proceedings. However, the court found 'substantial evidence of falsity' in the May 13 tweet that said the purchase was 'temporarily on hold' pending bot verification, noting that 'a jury could conclude that Musk had a motive to get out of the existing deal and used bots as a pretext to do so.' The judge also found 'no market reaction' to the May 17 tweet that suggested bots could be much higher than 20%, determining Musk was not liable for this claim. According to Reuters, Musk's first tweet said the purchase was 'temporarily on hold' pending details on whether bots represented less than 5% of users, causing Twitter's share price to fall 18% over two trading days. The second tweet said the percentage of bots could be much higher than 20%, and the purchase 'cannot move forward' until Twitter's chief executive proved it was under 5%. Judge Breyer also rejected Musk's claim that jurors were mocking him by highlighting the figure $4.20 in bright blue on the verdict form, noting that the number 420 is associated with marijuana culture and prevalent in San Francisco on April 20. The judge found no evidence that 420 was negatively associated with Musk, and Musk's legal team did not immediately respond to requests for comment on the latest ruling.
The court's decision maintains the jury verdict that found Musk had defrauded Twitter investors by trying to drive down the social media company's stock price after agreeing to the takeover. According to Reuters, this verdict stems from the 2022 takeover of Twitter and represents a significant legal setback for the billionaire entrepreneur. The ruling reinforces the jury's finding that Musk's actions constituted fraudulent conduct in the acquisition process, with investors accusing him of falsely suggesting that Twitter was overrun by fake and spam accounts to force the company to renegotiate his offer or let him back out. A lawyer for the investors estimated that Musk could owe $2.6 billion in damages following the March 20 verdict. As reported by Reuters, Musk ultimately bought Twitter in October 2022 and changed its name to X, now part of his rocket and satellite company SpaceX. This verdict adds to Musk's ongoing legal battles, as he also faces a lawsuit in Manhattan claiming he defrauded Twitter investors by waiting too long to disclose his initial investment. Mark Molumphy, a lawyer for the investors, called it "a very good day" for investors in public markets, after jurors "rejected Musk's effort to game that system."
The verdict stems from Musk's $44 billion takeover of Twitter in October 2022, which valued the company at $54.20 per share. As reported by Reuters, investors accused Musk of causing losses when they sold shares at depressed prices after his tweets about bot verification. The judge rejected Musk's claim that jurors were biased against him, noting that they deliberated over nearly four days and sided with Musk on some claims. This ruling adds to Musk's ongoing legal battles, as he also faces a lawsuit in Manhattan claiming he defrauded Twitter investors by waiting too long to disclose his initial investment. Musk often chooses to battle shareholders in court rather than settle, and this verdict represents another example of his preference for litigation over settlement. The case highlights the challenges faced by high-profile entrepreneurs in navigating public market communications during acquisition processes, and establishes a precedent for securities fraud liability related to social media communications. As noted by Reuters, this case essentially serves as a roadmap for how securities fraud liability can attach to social media posts, with the SEC maintaining that tweets and other social media posts can constitute regulated communications if they contain material information about public companies.
