Twitter Shareholder Trial Closing Arguments Begin, Musk Accused of Stock Manipulation
Closing arguments are scheduled to commence on Tuesday in a high-profile civil trial in San Francisco, where former Twitter shareholders have filed a class-action lawsuit against Elon Musk. The shareholders allege that the world's richest man engaged in a pattern of deceptive behavior that misled investors and artificially drove down the company's stock price as he attempted to back out of his $44 billion deal to acquire the social media platform in 2022.
The Core of the Legal Battle
The trial centers on accusations that Musk's actions caused significant financial harm to shareholders. Specifically, the lawsuit claims that Musk's public statements and maneuvers created uncertainty and devalued Twitter's stock during the tumultuous acquisition process. This case was filed just before Musk ultimately took control of Twitter in October 2022, later renaming it X, approximately six months after agreeing to purchase the embattled company for $54.20 per share.
Notably, the $44 billion price tag represents only a small fraction of Musk's immense fortune, which is currently estimated at around $839 billion. The legal proceedings have drawn widespread attention due to Musk's high profile and the substantial sums involved.
The Bot Controversy Takes Center Stage
A significant portion of the trial has focused on Musk's claims regarding the prevalence of bots and fake accounts on Twitter. Musk testified that Twitter had a much higher number of fake and spam accounts than the 5% figure disclosed in regulatory filings. He asserted that this alleged misrepresentation was a key reason for his attempt to retreat from the purchase agreement.
"Saying the bot number was at least this high was like saying the grass is green or the sky is blue," Musk stated during the trial, referencing analyst estimates that put the figure at 20% or more. This stance formed a critical part of his defense, suggesting that Twitter's disclosures were inaccurate.
Twitter's Defense and Historical Context
In response, Twitter's former Chief Financial Officer, Ned Segal, disputed Musk's claims on the witness stand. Segal testified that the actual number of fake accounts was closer to 1% and denied that Twitter had ever filed false reports with the Securities and Exchange Commission regarding spam metrics.
However, Segal acknowledged that Twitter had previously restated its financials after discovering an error in its calculation of daily users. In 2017, the company admitted to overstating monthly user numbers by mistakenly including users from a third-party app. Additionally, Twitter paid $809.5 million in 2021 to settle claims that it had overstated its growth rate and user figures, highlighting that bot-related issues were not new when Musk negotiated the deal.
Legal Maneuvers and Jury Instructions
The acquisition saga saw Musk initially try to back out of the deal, prompting Twitter to file a lawsuit in Delaware to force him to honor the original agreement. Just before that case was set to go to trial, Musk reversed course and agreed to proceed with the purchase at the initially promised price.
As the current trial in San Francisco nears its conclusion, the two sides met on Monday to review jury instructions. Judge Charles R. Breyer noted that many potential jurors held negative views of Musk but emphasized that even someone who is "not universally liked" deserves a fair trial and should not face discrimination or prejudice. This reminder underscores the importance of impartiality in the judicial process as the case moves toward a verdict.
The outcome of this trial could have significant implications for shareholder rights and corporate accountability in high-stakes acquisitions, setting a precedent for how similar disputes might be handled in the future.
