US judge upholds jury verdict against Elon Musk in Twitter investor fraud case

A US federal judge has refused to overturn a jury's finding that Elon Musk misled Twitter investors during his 2022 takeover saga, leaving intact a verdict that could ultimately cost the billionaire billions of dollars in damages.

In a ruling issued on Monday, US District Judge Charles Breyer rejected Musk's request to set aside the March jury verdict and also declined to dismantle the investor class that brought the lawsuit. The court additionally ruled that the investors are entitled to prejudgment interest, although Breyer concluded that Musk could not be held liable for one of the disputed social media posts.

The decision marks another legal setback for Musk over his handling of the high-profile acquisition that eventually saw him purchase Twitter for $44 billion before renaming the platform X.

Court finds investors presented sufficient evidence

The case centred on a series of posts Musk published in May 2022 after agreeing to acquire Twitter. Shareholders argued that his public comments questioning the prevalence of fake and spam accounts were designed to weaken the company's market value and improve his bargaining position as he sought to renegotiate the deal or walk away from it altogether.

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A jury agreed with much of that argument in March, finding that Musk's statements had misled investors who suffered losses after Twitter's share price fell.

Breyer, in Monday's ruling, said the evidence presented during the trial was sufficient for jurors to conclude that Musk's first disputed post was false and that concerns over automated accounts could reasonably be viewed as a pretext for escaping the original acquisition agreement.

"Even if the speaker has a change of heart or a momentary regret about a transaction, such qualms do not justify lying to the investing public," Breyer wrote.

However, the judge reached a different conclusion regarding another post published days later. Because the investors failed to show that the second message had a measurable impact on Twitter's market value, Breyer ruled that Musk could not be held liable for that particular statement.

Lawyers representing the shareholder class have estimated that the verdict, combined with prejudgment interest, could expose Musk to around $2.6 billion in damages. His legal team did not immediately respond to requests for comment following Monday's decision.

Mark Molumphy, counsel for the investors, welcomed the ruling, describing it as "a very good day" for public market investors after jurors "rejected Musk's effort to game that system."

Judge dismisses challenge over '420' jury notation

Breyer also rejected Musk's argument that the jury's verdict had been influenced by bias. Musk's lawyers had pointed to the appearance of "$4.20", highlighted in blue on the verdict form, claiming it demonstrated that jurors were mocking the billionaire and attempting to "send a message".

The figure has long been associated with cannabis culture and has repeatedly appeared in Musk's public life. His offer to acquire Twitter valued the company at $54.20 per share, while a separate controversy arose in 2018 when he claimed he had "funding secured" to take Tesla private at $420 a share, prompting civil fraud action by the US Securities and Exchange Commission that was later settled.

Breyer rejected the argument outright, writing that it "defies common sense" to suggest the jury acted out of prejudice. He noted that jurors deliberated for nearly four days and ruled in Musk's favour on several claims, undermining the suggestion that the verdict was driven by hostility rather than evidence.

The judge also observed that the number carried no inherently negative association with Musk, adding: "To the contrary, 420 is a reference to cannabis/marijuana. One need only walk around San Francisco on April 20 to observe how prevalent the celebration can be."

The ruling keeps alive one of the most consequential shareholder cases arising from Musk's acquisition of Twitter. It is not the only legal battle he faces over the deal. He is also defending a separate lawsuit in New York, where investors allege he delayed disclosing his initial stake in Twitter, enabling him to purchase shares at artificially low prices before revealing his position.