A federal court in the United States has refused to set aside a jury verdict that found Elon Musk liable for defrauding investors in Twitter (X) by allegedly attempting to push down the company’s stock price after agreeing to buy the social media platform in a $44 billion transaction.
On Monday, Charles Breyer, a judge of the United States District Court in San Francisco, rejected Elon Musk’s request to decertify the investor class and also approved the investors’ application for prejudgment interest. However, the judge ruled that Musk could not be held liable over one of the disputed tweets.
“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,” Breyer wrote.
Following the March 20 verdict, a lawyer representing the investors estimated that the damages awarded in the case could amount to approximately $2.6 billion.
Mark Molumphy, who represented the investors, described the ruling as “a very good day” for public market investors, saying the jury “rejected Musk’s effort to game that system.”
After acquiring the social media platform, Elon Musk rebranded Twitter (X) as X, which now operates under his aerospace company, SpaceX. He is also facing a separate lawsuit in New York City, where investors accuse him of defrauding them by delaying disclosure of his initial stake in Twitter, allegedly enabling him to purchase shares at lower prices while other investors sold theirs at reduced values.
Jurors ruled that Elon Musk was liable for tweets he posted on May 13 and May 17, 2022, in which he cast doubt on whether Twitter (X) was heavily populated by fake and spam accounts, commonly referred to as bots.
In the May 13 post, Elon Musk announced that the proposed acquisition of Twitter (X) was “on hold” until he received details confirming that fake or spam accounts, commonly known as bots, made up less than five percent of the platform’s users.
In a second tweet, Elon Musk claimed that fake and spam accounts could account for more than 20 percent of Twitter (X )’s users, adding that the takeover “cannot move forward” unless the company’s chief executive could prove the figure was below five percent.
Investors argued that Elon Musk made the statements in an attempt to pressure Twitter (X) into renegotiating the terms of the takeover or to create an opportunity to withdraw from the deal altogether.
They further claimed that Musk’s first tweet triggered an 18 percent drop in Twitter’s share price over two trading sessions, forcing investors who sold during that period to incur significant losses.
Charles Breyer said there was “substantial evidence of falsity” in Elon Musk’s May 13 tweet, adding 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.”
However, the judge agreed with Musk that the May 17 tweet did not result in financial losses for investors, noting that it had little impact on the market and therefore could not be linked to the damages claimed.
Charles Breyer also dismissed Elon Musk’s argument that jurors were “mocking” him or attempting to “send a message” by writing the figure “$4.20” in bright blue on the verdict form.
The number 420 is widely associated with marijuana culture, and Elon Musk has repeatedly referenced it over the years in interviews, social media posts, and various business-related announcements.
Elon Musk agreed to acquire Twitter (X) at $54.20 per share, a figure that also referenced the number 420. Earlier, in 2018, Musk sparked controversy after tweeting that he had “funding secured” to take Tesla private at $420 per share, a claim that led to a civil fraud lawsuit by the U.S. Securities and Exchange Commission, which was later resolved through a settlement.
However, Charles Breyer said it “defies common sense” to suggest the jurors were biased against Elon Musk, pointing out that they spent nearly four days deliberating and ruled in his favour on some of the claims. The judge also said there was no evidence that the number 420 carried any negative association with Musk in the context of the case.
“To the contrary, 420 is a reference to cannabis/marijuana,” Breyer wrote. “One need only walk around San Francisco on April 20 to observe how prevalent the celebration can be.”
