Elon Musk to Testify in High-Stakes Twitter Shareholder Trial
Elon Musk is set to take the stand in a pivotal shareholder trial commencing on Wednesday in San Francisco. The billionaire entrepreneur faces serious allegations of making false and misleading public statements that artificially deflated Twitter's stock price prior to his monumental $44 billion purchase of the social media platform in 2022.
Details of the Shareholder Lawsuit
The legal action was initiated in October 2022 in the U.S. District Court for the Northern District of California. It represents Twitter shareholders who divested their stock between May 13 and October 4, 2022, a critical period just weeks before Musk finalized his acquisition. The core accusation is that Musk deliberately violated federal securities laws by issuing public declarations that were "carefully calculated to drive down the price of Twitter stock."
Chronology of Events and Alleged Misstatements
Musk, the CEO of Tesla, originally agreed to purchase Twitter and take it private in April 2022. However, on May 13, he abruptly announced his plan was "temporarily on hold," citing a need to verify the prevalence of spam and fake accounts on the platform. This declaration precipitated a significant decline in Twitter's stock value.
According to the lawsuit, Musk compounded the situation days later by tweeting that the deal "cannot go forward" and asserting that nearly 20% of Twitter accounts were fraudulent. The legal filing contends his May 13 statement was fundamentally false, as Twitter never consented to pause the agreement, and the signed merger contract contained no provision permitting such a delay.
In the subsequent weeks, Musk allegedly persisted in efforts to postpone or withdraw from the acquisition through a series of disparaging remarks about Twitter's business operations, which further eroded the company's share price. By July 2022, he intensified focus on the bot issue, threatening to abandon the offer entirely due to insufficient data on fake accounts—despite having explicitly waived his right to due diligence in his original "take it or leave it" proposal.
Financial Impact and Legal Arguments
The financial repercussions were stark. When Musk tweeted on July 8, 2022, that he was terminating the deal over the fake accounts dispute, Twitter's stock closed at $36.81 per share. This represented a precipitous 32% drop from his initial offer price of $54.20 per share. The lawsuit asserts, "To try to renegotiate the price or delay the merger, Musk made materially false and misleading statements and omissions, and engaged in a scheme to deceive the market, all in violation of the law."
It is noteworthy that the issue of bots and fake accounts was not novel for Twitter. The company had previously settled claims for $809.5 million in 2021 regarding overstated growth metrics and user figures. Moreover, Twitter had consistently disclosed its bot estimates to the Securities and Exchange Commission for years, with caveats that these figures might be conservative.
Resolution of the Acquisition and Aftermath
Following mutual lawsuits between Twitter and Musk, he ultimately reaffirmed his original $44 billion proposal on October 4, 2022, which Twitter accepted. The transaction concluded later that month. In the months that followed, Musk implemented sweeping changes, including substantial workforce reductions, dismantling of the trust and safety team, and relaxation of content moderation policies. In July 2023, he rebranded the platform as X.
Historical Context of Musk's Legal Challenges
This is not the first instance where Musk has been compelled to defend his social media communications in a courtroom. Three years prior, he testified for approximately eight hours in a San Francisco federal trial concerning a 2018 proposal to take Tesla private at $420 per share—a deal that never materialized. In that case, a nine-member jury ultimately exonerated him of any wrongdoing.
The upcoming trial promises to scrutinize the intricate interplay between corporate communications, market influence, and legal accountability in the digital age.
