Twitter shareholder case accusing Musk of driving down stock goes to jury

Members of Elon Musk's legal team, including attorney Stephen Broome, left, exit the Phillip Burton Federal Building after representing Elon Musk, in San Francisco, Wednesday, March 4, 2026. (Dan Hernandez/San Francisco Chronicle via AP)

SAN FRANCISCO -- Closing arguments concluded Tuesday in a trial pitting Elon Musk against Twitter shareholders who say the world’s richest man engaged in a pattern of deceptive behavior that misled investors as he attempted to back out of his US$44 billion deal to buy the social media platform in 2022.

The case is now in the hands of eight jurors, who will decide whether Musk is liable for defrauding investors with tweets and statements he made in the months leading up to his purchase of Twitter.

The civil trial in San Francisco centers on a class-action lawsuit filed just before Musk took control of Twitter, which he later renamed X, in October 2022, six months after agreeing to buy the embattled company for $44 billion, or $54.20 per share. The price represents a sliver of the Tesla CEO’s fortune, now estimated at $837 billion.

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Much of the trial focused on Musk’s claims about the number of bots on Twitter. Musk testified, as he long contended, that Twitter had a much higher number of fake and spam accounts than the 5% it disclosed in regulatory filings. He used what he called Twitter’s misrepresentation of the number of fake accounts on its service as a reason to retreat from the purchase.

After Musk tried to back out, Twitter went to court in Delaware to force him to honour his original deal. Just before that case was scheduled to go to trial, Musk reversed course again and agreed to pay what he had originally promised.

Mark Molumphy, a lawyer for the plaintiffs, asked jurors to hold Musk accountable and compensate thousands of investors who lost money because of tweets Musk sent, including one from May 13, 2022, that said the deal was “on hold.”

“He knew what he was doing,” Molumphy said.

The plaintiffs argue that, as Tesla’s stock price declined and buying Twitter became too expensive for Musk, he tweeted statements that drove down the stock price in the hopes he could renegotiate the deal for a lower price or get out of it altogether.

Musk’s tweets, the plaintiffs’ lawyer argued, were not some “innocent mistake” or a “stupid tweet” off the top of his head, but carefully calculated to drive down’s Twitter’s stock price.

Michael Lifrak, a lawyer for Musk, however, countered that the plaintiffs did not present “one shred of evidence” to show that Musk purposely plotted to drive down Twitter’s stock price. He reminded the jury that according to their instructions, even motive and intent to commit fraud is not enough to prove that actual fraud has taken place.

Lifrak also said there’s “zero evidence” that Tesla’s stock price decline during the time he was in the process of buying Twitter was the issue.

Everyone “wants to pay less and not more,” he said, adding that “you can’t just say” he wanted a lower price and therefore he committed fraud.

The problem of bots and fake accounts on Twitter wasn’t new at the time Musk negotiated the deal. The company had paid $809.5 million in 2021 to settle claims it was overstating its growth rate and monthly user figures. Twitter also disclosed its bot estimates to the Securities and Exchange Commission for years while also cautioning that its estimate might be too low.

But Musk claimed the number was much higher, at least 20% according to some analysts. Saying the bot number was at least this high was like “saying the grass is green or the sky is blue,” Musk said.

Twitter’s former CFO Ned Segal disputed this claim and said on the witness stand that the number was actually closer to 1%.

Asked if Twitter ever filed false filings to the SEC that misstated its spam numbers, Segal said it did not. But he mentioned that the company once restated its finances after it became aware of a mistake in its calculation of daily users. In 2017, Twitter said it had been overstating its monthly user numbers by mistake because it was including users of a third-party app it should not have.

Molumphy showed jurors tweets Musk sent before he agreed to buy Twitter, including ones from 2020 complaining about the number of fake accounts on the platform. He also referred to Musk’s testimony from last week, where, when he was asked whether he thought Twitter was “exaggerating” their user numbers before signing the deal, Musk replied, “Yes.”

Referring to Musk’s May 13 tweet of the deal being “on hold” that’s become central to the case, Lifrak, his lawyer, used visual aids to try to make it clear to the jury that it was not a false statement. First, he showed a screen with the words “people who said the tweet was false at the time:” with a blank space underneath. A second screen said “people who said the tweet was false at the trial:” with another blank space underneath.

He also addressed animosity toward Musk, and urged jurors, who hail from around the Bay Area not to “fall for a San Francisco us vs. Elon Musk dynamic.”

“He may tweet stupid things,” Lifrak said. “But this isn’t a stupid tweeter trial.”

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Rather, “it’s a trial on whether this man committed securities fraud and whether they proved it -- and they didn’t.”

On Monday, the two sides met to go over instructions to the jury. Judge Charles R. Breyer noted that many in the jury pool had negative views on Musk. But, he added, a person who is “not universally liked” still deserves a fair trial, and should not be treated in a discriminatory or prejudicial way.

Musk, however, seems to already contend he hasn’t been treated fairly in the courtroom and earlier this month filed a motion for a mistrial, saying he has been deprived of his right to a fair trial because of the plaintiffs’ -- and in some cases the judge’s -- conduct.

Barbara Ortutay, The Associated Press