Elon Musk testifies in Twitter shareholder trial alleging he purposefully drove down stock before his purchase

Elon Musk faced a shareholder trial in San Francisco on Wednesday, where he was accused of making false and misleading statements that led to a drop in Twitter’s stock price before he acquired the social media platform for $44 billion in 2022. The lawsuit, filed in October 2022, alleged that Musk violated federal securities laws by strategically making public statements to drive down Twitter’s stock value.

The legal battle stemmed from Musk’s decision to buy Twitter and take it private in April 2022. However, on May 13, he announced that the deal was “temporarily on hold” as he needed to investigate the prevalence of spam and fake accounts on the platform. This announcement caused Twitter’s stock to plummet. Subsequently, Musk tweeted that the deal could not proceed due to the high number of fake accounts, further impacting Twitter’s stock price.

During the trial, Musk was questioned about his tweets regarding the Twitter acquisition and his purchases of Twitter stock. He explained that he did not consider it significant to disclose his stock acquisitions publicly and that he had bought shares in various companies without posting about it. Interestingly, once Musk did mention his stake in Twitter, the stock price surged by 27% in a single day.

The lawsuit also scrutinized Musk’s May 13 tweet, which claimed the Twitter deal was temporarily on hold pending clarification on fake accounts. The lawsuit argued that this statement was false and had a material impact on Twitter’s stock price. Musk defended himself by stating that he was committed to the deal despite the temporary hold announcement.

As the trial progressed, it was revealed that Musk attempted to delay or cancel the deal by making disparaging remarks about Twitter’s business, causing further fluctuations in the stock price. Despite Musk waiving due diligence for his acquisition offer, he later cited concerns about fake accounts as a reason to back out of the deal.

In July 2022, Musk ultimately decided to proceed with the original $44 billion deal to buy Twitter, which was accepted by the company. Following the acquisition, Musk made significant changes to Twitter, including reducing the workforce, restructuring the trust and safety team, and altering content moderation policies. In July 2023, he even renamed the platform as X.

This legal battle wasn’t Musk’s first encounter with allegations of misleading investors through social media. Previously, he had faced a trial regarding his plans to take Tesla private in 2018, where he was ultimately cleared of any wrongdoing by a jury.