A US federal court has dealt a significant setback to billionaire entrepreneur Elon Musk by rejecting his request to overturn a jury verdict that found him liable for defrauding Twitter (now X) investors. The court also denied Musk’s motion to decertify the investor class while granting the investors’ request for prejudgment interest. However, the court ruled that Musk was not liable for one of the disputed tweets.
In his order, US District Judge Charles Breyer stated that even if a person later regrets entering into a business transaction or changes their mind, such circumstances do not justify making false or misleading statements to investors.
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The case stems from Musk’s approximately $44 billion acquisition of Twitter in 2022. Investors alleged that Musk made misleading public statements about the number of fake and spam accounts, commonly known as bots, on the platform in an effort to drive down Twitter’s share price so he could renegotiate the acquisition terms or withdraw from the deal altogether.
According to the investors, Musk’s statements caused Twitter’s stock price to decline, resulting in substantial financial losses for shareholders who sold their shares during that period. Lawyers representing the investors have estimated that, following the jury’s verdict delivered in March, Musk could face approximately $2.6 billion in damages.
The court specifically examined Musk’s May 13, 2022 tweet, in which he stated that the Twitter acquisition was “temporarily on hold” pending verification that fake and spam accounts represented less than 5% of the platform’s users. Judge Breyer found there was substantial evidence suggesting the statement was false and said a reasonable jury could conclude that Musk had a motive to back out of the existing deal and used the bot issue as a pretext.
However, the court reached a different conclusion regarding Musk’s May 17, 2022 tweet. Judge Breyer held that the statement did not have a significant impact on the market and therefore did not establish liability for investor losses arising from that particular tweet.
The judge also rejected Musk’s argument that the jury had been biased against him by highlighting the figure “$4.20” on the verdict form as a reference intended to mock him. The court found no credible evidence of prejudice, noting that the jury deliberated for nearly four days and ruled in Musk’s favour on certain claims, demonstrating an impartial assessment of the evidence.
Musk ultimately completed Twitter’s acquisition in October 2022 and subsequently renamed the social media platform X. The company now operates under the corporate structure of SpaceX. Further legal proceedings will determine the final amount of damages and any additional relief that may be awarded to the investors.
