By Lina Irawan 
This landmark decision represents a rare legal setback for Elon Musk, often characterized as "Teflon Elon" for his uncanny ability to navigate and often triumph in high-stakes legal battles that many anticipated he would lose. The eight-member jury panel meticulously calculated the daily impact of Musk’s statements on Twitter’s stock price over a period of approximately five months. The precise amount of damages he will be compelled to pay to individual investors, a sum that could easily stretch into hundreds of millions or even billions of dollars, will be determined at a subsequent phase when shareholders formally submit their claims.
The verdict, reached after roughly three days of intense deliberations, marks a stark contrast to Musk’s previous legal triumphs. Notably, in 2023, he successfully defended against allegations from Tesla Inc. investors who claimed he misled them with a 2018 tweet stating he had "funding secured" to take the electric car-maker private. As co-founder and CEO of Tesla, Musk has a formidable track record, which made this Twitter-related defeat all the more surprising to market observers and legal analysts alike.
Mark Molumphy, a lead attorney representing the aggrieved investors, expressed confidence post-verdict, estimating the total damages could reach $2.6 billion. While this figure is substantial, it pales in comparison to Musk’s staggering net worth, which stood at an estimated $661.1 billion on the day of the verdict, according to the Bloomberg Billionaires Index. Consequently, even a multi-billion dollar payout is unlikely to significantly impact the world’s richest person’s personal fortune. Joseph Cotchett, Molumphy’s partner at Cotchett, Pitre & McCarthy LLP, underscored the broader implications of the ruling, stating, "This case is much bigger than Twitter, this case goes right to the heart of Wall Street and what’s been going on in recent years. It’s a great example of what you cannot do to the average investor." This sentiment highlights the potential for the verdict to establish a significant precedent regarding corporate transparency and accountability in the digital age, particularly concerning public figures’ influence on financial markets via social media.
Musk’s legal team declined to comment immediately following the courtroom proceedings, and Musk himself did not respond to requests for comment. In the federal court system, the losing party typically retains the right to appeal the verdict, suggesting that this legal saga may not be entirely concluded.
The trial itself spanned approximately two weeks, featuring compelling live testimony from Musk himself and key former Twitter executives, including then-CEO Parag Agrawal and CFO Ned Segal. Their accounts illuminated the tumultuous six-month period in 2022 when the serial entrepreneur dramatically wavered on his commitment to acquire the platform. This period was characterized by intense public speculation, significant market volatility, and ultimately, a hard-fought legal battle initiated by Twitter’s board of directors in the Delaware Court of Chancery to compel him to honor the original agreement.
The core of the investors’ lawsuit hinged on the assertion that Musk’s barrage of social media posts and public statements – most prominently a May 13, 2022, tweet declaring the deal "temporarily on hold" pending a review of the platform’s user bot count – constituted a deliberate and calculated strategy. Their argument posited that this was not merely a genuine concern about bot prevalence but rather a strategic maneuver designed to artificially depress Twitter’s stock price, thereby creating leverage for him to renegotiate the acquisition at a more favorable, lower price.
In his closing argument, Molumphy passionately conveyed to the jury that Musk’s tweets were "not some innocent mistakes, some stupid tweet that he didn’t consider." He emphatically stated, "They were intentional, deliberate, and devised to convey to investors that Twitter was overrun with spam." This argument aimed to establish the necessary element of "scienter," or intent to deceive, which is crucial for proving securities fraud.
Musk took the stand for more than a day, maintaining his narrative that former Twitter executives, including Agrawal and Segal, had knowingly misrepresented the actual prevalence of spam and fake accounts (bots) on the platform in both private discussions and public financial disclosures. His defense, articulated by attorney Michael Lifrak of Quinn Emanuel Urquhart & Sullivan LLP, contended during closing arguments, "Of course people were talking about a renegotiation once this bot issue came up. There was no secret about that." This implied that any discussions of a lower price were a natural consequence of what Musk believed to be a fundamental misrepresentation of the company’s value, rather than a pre-meditated scheme to manipulate the stock.
The period of uncertainty and Musk’s public equivocation exacted a heavy toll on Twitter’s market value. The stock exhibited extreme volatility for several months, wiping out billions of dollars in market capitalization. When Twitter officially sued Musk in Delaware in July 2022 for attempting to renege on the purchase, the company’s shares plummeted to a low of $32.52, a staggering 40% below Musk’s original buyout price of $54.20 per share. This significant drop provided compelling evidence for the plaintiffs regarding the causal link between Musk’s actions and investor losses.
During his testimony, Musk stated that he ultimately agreed to proceed with the deal at the original $54.20 per share price because he believed the Delaware judge overseeing Twitter’s lawsuit was biased against him and that he would likely lose in court. He attempted to differentiate his "temporarily on hold" tweet from an outright cancellation, telling the jury, "I’m not saying I’m not going to do the deal. At no point did I say the deal was canceled." However, under cross-examination by an investors’ lawyer, Musk conceded that the "temporarily on hold" post was indeed a mistake. "It may not be my wisest tweet," he admitted, adding, "I don’t know if I would call it my stupidest. But if it led to this trial it probably qualifies as such." This admission likely played a role in the jury’s finding of intentional misrepresentation.
The verdict carries significant implications beyond the immediate financial penalties for Musk. It underscores the increasing scrutiny on the public statements of corporate leaders, especially those with massive social media followings, and their potential to influence stock markets. In an era where a single tweet can move billions, this case serves as a powerful reminder that such influence comes with legal responsibilities. It reinforces the principle that even the most powerful individuals are accountable for the truthfulness and intent behind their public pronouncements when those pronouncements affect investor confidence and market valuations. For the "average investor" that Cotchett mentioned, it offers a measure of protection against market manipulation by those with outsized influence. The case is officially known as Pampena v. Musk, 22-cv-05937, US District Court, Northern District of California (San Francisco).