Elon Musk took the stand on Wednesday in a trial brought by Twitter investors, who allege the billionaire committed securities fraud as he was buying the social media company in 2022. The class-action lawsuit alleges Musk agreed to buy Twitter but then waffled for months, attacking the company with the goal of bringing down the stock price to get a better bargain.
After contentious legal wrangling, Musk did eventually buy Twitter for $54.20 a share, his original offer, totalling around $44bn. Musk testified on Wednesday that he didn’t realize his attacks on the company, mostly done via tweet on Twitter itself, would lower the company’s stock price or hurt its investors.
The proceedings began with the investors’ attorney questioning Musk about whether he was aware that his public broadsides against Twitter would sway stock prices, according to CNBC. Musk responded, saying the “stock market is like a manic depressive”.
“My tweets have sometimes the opposite effect of what one would expect on stock prices,” he said, per CNBC. “Sometimes they have the expected effect.”
Throughout 2022, Musk posted constantly to his millions of Twitter followers that the social network was rife with bots that produced spam and created fake accounts. At one point, he tweeted that at least 20% of the accounts of Twitter were fake or spam, and if the company couldn’t prove otherwise, the “deal cannot move forward”.
The trial is taking place in federal court in San Francisco under Judge Charles Breyer. During jury selection, nearly half of the prospective jurors were dismissed because they held strong negative opinions of Musk. Opening statements began Monday.
“We’re here today because Elon Musk cheated investors,” Mark Molumphy, a lawyer for the plaintiffs, said during opening statements, according to Bloomberg. “The evidence will show Mr Musk knew exactly what he was doing.”
Musk’s lawyer, Michael Lifrak, shot back, saying the billionaire’s complaints about Twitter were legitimate and his concerns “were real and weren’t a fraud”.
During the six months under scrutiny for the investor trial, roughly from April to October 2022, plaintiffs allege Musk aimed to pressure the board so that it would sell Twitter for a lower price than his initial offer.
When Musk indicated he was backing out of the purchase in May 2022 with a tweet that said the buyout was “temporarily on hold”, Twitter’s shares dropped precipitously over the next 24 hours, at times falling by 20%. The stock continued to be unstable for months. Investors involved in the lawsuit say they sold their shares at prices below $54.20 when they thought Musk’s buyout offer was dissolving.
Musk testified on Wednesday that he didn’t anticipate Twitter’s stock to plummet with the “on hold” tweet.
“It may not be my wisest tweet,” he said, according to the New York Times. “I wouldn’t necessarily describe it as incredibly stupid. But if it led to this trial, I guess I would qualify it as such.”
Aaron Arnzen, a lawyer for the investors, maintained that Musk knew exactly what he was doing. “He wanted a different deal,” Arnzen said, per the Times. “So he mounted a public spectacle to trash the company, to drive the stock price down, to renegotiate or escape the deal.”
After Musk bought Twitter in 2022, he took it private and changed its name to X. Last year, he merged the business with his artificial intelligence company, xAI, and then brought both of those businesses under SpaceX, his rocket company. Musk, the richest person in the world with a net worth estimated above $800bn, is expected to take SpaceX public sometime this year in what is projected to be a record IPO. Private investors have valued his conglomeration of businesses at $1.25tn.
If the jury rules in favor of the Twitter investors, Musk could be required to pay them back for their reported losses. The decision could also influence other upcoming lawsuits against the billionaire, including one brought by the US Securities and Exchange Commission that alleges Musk violated the law by not disclosing his stake in Twitter in the requisite time period.
Musk has repeatedly denied any wrongdoing. Now, the onus is on the investors’ lawyers to prove that Musk intentionally tried to manipulate Twitter’s share prices. The trial is expected to last two to three weeks.
