Trial over Elon Musk’s $44 billion Twitter takeover heads to jury

SAN FRANCISCO (CN) — A San Francisco jury heard closing arguments Tuesday on whether Elon Musk violated securities law during his $44 billion acquisition of Twitter in 2022.

Investors, including lead plaintiffs Steve Garrett, Nancy Price, John Garrett and Brian Belgrave, sued Musk in October 2022 over claims they suffered major losses when Musk deliberately made misleading statements about the presence of spam bot accounts on Twitter to drive down the company’s stock, in hopes of backing out of the acquisition deal or renegotiating more favorably for himself.

The statements at issue include a tweet from May 13, 2022, where Musk said the Twitter deal was on hold “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” A couple hours later, Musk followed up with another tweet saying he was “still committed to acquisition.”

In addition to the tweets, Musk a few days later at a conference said fake and spam accounts made up at least 20% of Twitter users at the time, and tweeted a poop emoji when then-Twitter CEO Parag Agrawal commented there was no way for external parties to calculate this information.

Musk tweeted the next day that his offer to buy Twitter was “based on Twitter’s SEC filings being accurate" and that the deal would not be moving forward until Agrawal provided evidence of bot numbers under 5%.

During the two-week trial, the eight-person jury heard testimony from former senior leaders at Twitter, bankers from Morgan Stanley and Goldman Sachs involved in the transaction, and lawyers who represented both Musk and Twitter during the acquisition.

Musk himself took the stand on March 4, telling the jury that he had real concerns over the presence of bots on Twitter and did not intentionally drive down Twitter’s stock price.

Mark Molumphy of Cotchett, Pitre & McCarthy, an attorney for the investors, began closing arguments by comparing Musk’s commitment to the case to his conduct during the acquisition.

“In 2022, after signing a binding agreement, Mr. Musk proposed and promised to use his best efforts to get the deal done. Musk decided just weeks later that he didn’t want to pay investors what he promised to pay. The deal in his mind had gotten too expensive,” he said.

“So, he did here what he did on the stand, he trashed the executives, he trashed the company, he trashed the stock, then he fled the scene, never to be seen again.”

The investors argue Musk knew about the prevalence of spam accounts on Twitter before he purchased the platform and deliberately rushed through the dealmaking process to make his offer more attractive, skipping traditional steps intended to give buyers more information on a company.

They claim the billionaire only began to second-guess the deal because of issues he ran into selling shares of Tesla stock to pay for the acquisition, and deliberately made a series of false or misleading comments about Twitter’s bot counts to hurt the company’s stock price.

“The evidence will show that they were intentional, deliberate, carefully devised to convey to investors that Twitter was overrun by spam,” Molumphy said. “Musk literally had no proof for the tweets he issued. During two weeks of testimony, there was no evidence proving that allegation.”

However, the defense argued Musk couldn’t have defrauded investors because the issue of spam and bot accounts on Twitter was a genuine concern of his for years before the acquisition deal took place.

Michael T. Lifrak of Quinn Emanuel Urquhart & Sullivan, an attorney for Musk, told the jury his client tried to get more information about how Twitter calculates the 5% bot estimation after signing the deal, but Twitter refused to provide answers or data for Musk to test the theory, leading him to tweet about his doubts over Twitter’s math.

“At the end of the day, look at all the evidence that this was a legitimate concern, that this was not fraud. What did they show you that this bot thing was made up? This was real, this was right,” he told the jury.

Lifrak additionally argued the investors had not met their burden of proof for their scheme claims against Musk, arguing that “tweeting is not securities fraud.”

“They have not proven a plot. There is not one shred of evidence that Mr. Musk tried to drive down Twitter’s stock price. Without that, no fraud, no lie, no plot to drive down stock price, no case,” he said.

Molumphy asked the jury to hold the world’s richest person accountable for his actions.

“People have a right to rely on the securities market. When you open your mouth, you speak the truth. In this case, you shouldn’t allow any person, no matter how powerful, how rich, how influential, to say whatever he wants, whenever he wants, and not be held accountable,” he said.

Meanwhile, Lifrak reminded the jury not to be influenced by any personal feelings about Musk.

“When someone is standing trial that does things like stupid tweets, does things you may not like, does things you may hate, that is when the justice system matters most,” he said.

Following the trial, Frank Bottini of Bottini & Bottini, attorney for the investors, told Courthouse News they were “thankful for the jury’s service and we’re keeping our fingers crossed.”

A representative for the defense did not immediately respond to a request for comment.

U.S. District Judge Charles R. Breyer, a Bill Clinton appointee, presided over the trial.

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