Investors Claim Musk's Tweets Cost Them Millions in Twitter Acquisition Chaos

Elon Musk is facing trial in federal court over allegations that he manipulated the stock price of Twitter Inc. during the turbulent months leading up to his $44 billion acquisition of the social media platform in 2022.

The case, which began Monday in San Francisco, centres on claims by a group of investors that Musk deliberately issued misleading tweets in an effort to drive down Twitter’s market value and renegotiate a lower purchase price. Musk ultimately completed the deal at the originally agreed $54.20 per share, but only after a six-month period marked by public criticism of the company, an attempted withdrawal from the agreement, and a lawsuit by Twitter compelling him to close the transaction.

In opening statements, Mark Molumphy, representing the investors, told jurors that Musk “cheated investors” by posting false and misleading information about the deal in an attempt to save billions of dollars. According to the plaintiffs, Musk’s May 2022 tweet stating the buyout was “temporarily on hold” — pending verification of spam and fake accounts — triggered a sharp drop in Twitter’s share price and created panic in the market.

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When the tweet was posted, Twitter shares fell nearly 20% in premarket trading and closed the day down about 10%. Investors argue that Musk’s subsequent statements questioning the proportion of fake accounts on the platform were a pretext to either abandon the deal or secure a more favourable price.

Musk has denied any wrongdoing. His lawyer, Michael Lifrak, told the jury that none of Musk’s statements were false and that his concerns about bot activity were genuine. The defence contends that Musk believed his remarks to be accurate at the time and that it is impossible to directly attribute stock price movements to his tweets.

The trial revisits a familiar theme in Musk’s legal history — his use of social media to communicate market-sensitive information. In 2018, he reached a settlement with the US Securities and Exchange Commission (SEC) after tweeting that he had “funding secured” to take Tesla Inc. private. The agreement required him to have certain company-related social media posts pre-approved by legal counsel. Musk later challenged that arrangement up to the US Supreme Court but was unsuccessful.

He has, however, prevailed in several high-profile courtroom battles. In 2023, a San Francisco jury cleared him of liability in a lawsuit brought by Tesla investors over the “funding secured” tweet. He also successfully defended against claims in Delaware that Tesla’s acquisition of SolarCity was an overpriced bailout and recently secured reinstatement of his Tesla compensation package from the Delaware Supreme Court after a lengthy legal dispute.

Legal experts note that proving intent will be central to the investors’ case. Plaintiffs must demonstrate that Musk knowingly made misleading statements to influence Twitter’s stock price. Musk is expected to testify, as he has done in previous trials.

The case is being heard by Senior US District Judge Charles Breyer in the Northern District of California. During jury selection, reports indicated that a significant number of prospective jurors were dismissed after expressing strong views about Musk, raising questions about impartiality.

Regardless of the outcome, Musk continues to face additional legal challenges related to the Twitter acquisition, including a separate investor lawsuit in New York and an SEC case in Washington. He has denied wrongdoing in those matters as well.

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