By Abhirup Roy and Jonathan Stempel
SAN FRANCISCO, March 17 (Reuters) – A lawyer for former Twitter shareholders suing Elon Musk urged a federal jury on Tuesday to hold the world’s richest person liable for driving down Twitter’s stock price in 2022 by attempting to back out of or renegotiate his $44 billion purchase of the social media platform.
In his closing argument in a San Francisco federal court, the lawyer Mark Molumphy told jurors that Musk defrauded shareholders by publicly questioning on three occasions whether Twitter was overrun with fake and spam accounts, and perhaps had four or five times more than the 5% it disclosed.
Molumphy also said Musk was not fazed when he signed the April 2022 merger agreement despite knowing by then that Twitter understated the number of bogus accounts, known as bots.
“He trashed the company. Trashed the executives. And tanked the stock,” Molumphy said.
Musk’s lawyer Michael Lifrak countered in his closing statement that the billionaire had “real” concern about bots and was focused on determining how bad the problem was, not how to save money.
“Two tweets and a podcast does not equal securities fraud,” Lifrak told jurors. All the plaintiffs have argued, he said, is that if Mr. Musk had stayed silent, the stock would not have dropped, but they have not shown any evidence of fraud.
“The only thing that plaintiffs have told you is that if Mr. Musk hadn’t said anything, the stock wouldn’t have gone down. But they didn’t prove fraud.”
The jury began deliberations and were dismissed for the day without reaching a verdict. They are expected to resume deliberations on Wednesday, a court officer said.
Jurors will consider whether Musk’s three statements about bots were fraudulent, and whether he schemed to defraud Twitter shareholders by driving down the share price. If the answer is no, Musk wins. If the answer is yes, jurors will consider possible damages.
Musk started questioning his Twitter purchase shortly after agreeing to it, posting on the social media platform that the transaction was “temporarily on hold” and that the percentage of bots could be 20% or more.
In one challenged statement, he tweeted on May 17, 2022 that the purchase “cannot go forward” until Twitter’s chief executive proved the bot percentage was less than 5%.
Twitter later sued to force Musk to complete the takeover, which he did in October 2022. Musk later rebranded Twitter as X. The platform is now part of his rocket and satellite company SpaceX.
MULTIPLE COURTROOM BATTLES FOR MUSK
Musk has on multiple occasions chosen to battle shareholders in court rather than settle, including in a 2023 trial concerning his electric car company Tesla and litigation over his $139 billion Tesla pay package.
He won both cases. Musk is now also in talks to settle a U.S. Securities and Exchange Commission civil lawsuit accusing him of violating federal law by waiting too long in 2022 to disclose his initial purchases of Twitter so he could scoop up more before investors caught on.
The current trial in San Francisco began on March 2. The lawsuit covers investors who sold Twitter stock between May 13 and October 4, 2022.
X is only a small part of Musk’s net worth, which Forbes magazine estimates is $836.4 billion.
SpaceX’s purchase last month of Musk’s artificial intelligence company xAI, which housed X, created the world’s most valuable private company, worth about $1.25 trillion at the time.
The combined company could sell shares in an initial public offering as early as June.
(Reporting by Abhirup Roy in San Francisco and Jonathan Stempel in New York; Editing by Stephen Coates)
Comments