Elon Musk on trial for tweets tied to Twitter takeover
What's the story
Elon Musk, the world's richest person, is facing a trial over his tweets related to the acquisition of Twitter Inc. in 2022. The case was filed by a group of investors who allege that Musk manipulated Twitter's stock price to negotiate a better deal for himself. The trial began on Monday in San Francisco federal court and will see Musk testify as the star witness.
Allegations
Investors allege Musk misled them to negotiate better Twitter deal
The investors allege that Musk publicly criticized Twitter to lower its market value, thereby benefiting himself at their expense. They claim he tweeted false and misleading information about the deal, with the intention of cheating investors and saving himself billions of dollars on the Twitter buyout. However, Musk's lawyer Michael Lifrak has countered these claims by saying that none of the information in question was false.
Timeline
Trial will revisit Musk's tumultuous 6 months in 2022
The trial will revisit the tumultuous six months of 2022 when Musk went from a hostile takeover of Twitter to trying to back out of his offer. This was before he finally completed the deal after Twitter sued him. The investors are focusing on Musk's May 2022 announcement that he was putting the buyout "temporarily on hold," questioning how many users were real and how many were bots.
Impact
Twitter shares dropped sharply after Musk's May announcement
Musk's announcement in May 2022 resulted in a nearly 20% drop in Twitter shares during premarket trading and a roughly 10% decline by the end of the day. The stock remained volatile for months after. The investors' legal team will have to prove that Musk intentionally tanked the stock, which is one of their main hurdles to win this case.
Past cases
Musk denies wrongdoing, maintains he had no intention to deceive
Musk denies wrongdoing, maintaining he had no intention to deceive investors. This isn't the first time his tweets have landed him in trouble. In a separate 2018 settlement with the SEC, Musk agreed to have his social media posts about "material" information involving Tesla Inc. pre-approved by an in-house lawyer after he was accused of securities fraud for tweeting that he had "funding secured" to take Tesla private.
Defense strategy
Legal team's defense and judge presiding over case
Musk's legal team is challenging the claim that he caused losses for Twitter shareholders, arguing it's impossible to link his tweets to stock price movements. They also argue that Musk "understood the statements to be true at the time they were made" and they weren't part of a scheme to drive down Twitter's stock price. The case is being heard by Senior US District Judge Charles Breyer.