SAN FRANCISCO (AP) - Closing arguments are set to begin on Tuesday in a significant trial involving Elon Musk and Twitter shareholders. The shareholders accuse Musk of engaging in deceptive practices that misled investors while he attempted to withdraw from his $44 billion acquisition of the social media platform in 2022.
The civil trial, held in San Francisco, revolves around a class-action lawsuit that was filed shortly before Musk took over Twitter, which he later renamed X, in October 2022. Musk's agreement to purchase the company for $44 billion, valuing the shares at $54.20 each, represented a small fraction of his wealth, which is currently estimated to be around $839 billion.
A significant aspect of the trial centered on Musk's assertions regarding the prevalence of bots on Twitter. Musk testified, as he has maintained for some time, that the number of fake and spam accounts on Twitter was considerably higher than the 5% that the company disclosed in its regulatory documents. He used what he described as Twitter's misrepresentation of these fake account numbers as justification to back out of the purchase deal.
Following Musk's attempts to withdraw, Twitter initiated a court case in Delaware to compel him to abide by the terms of the original agreement. Just as the case was about to go to trial, Musk reversed his decision once more, ultimately agreeing to purchase the company for the originally negotiated price.
The issue of bots and fake accounts on Twitter was not a new concern at the time Musk negotiated the purchase. In 2021, the company had settled claims for $809.5 million after being accused of overstating its growth rate and monthly user figures. Furthermore, Twitter had disclosed its bot estimates to the Securities and Exchange Commission (SEC) for several years, cautioning that its estimations might be conservative.
Musk claimed the proportion of bots was significantly greater, estimating at least 20% according to various analysts’ assessments. He argued that stating this number was at least that high was as obvious as “the grass is green or the sky is blue.”
However, Twitter's former CFO, Ned Segal, contradicted Musk's assertion during his testimony, revealing that the actual figure was closer to 1%. When questioned if Twitter had ever filed false reports to the SEC regarding its spam account numbers, Segal asserted that it had not. He did acknowledge, however, that the company corrected its financial statements in the past after discovering errors in the calculation of daily users. In 2017, Twitter admitted to mistakenly including users of a third-party app which led to an overstatement of its monthly user figures.
On Monday, prior to the closing arguments, both parties convened to review instructions for the jury. Judge Charles R. Breyer pointed out that many jurors harbored negative sentiments towards Musk. Nevertheless, he emphasized that even those who are “not universally liked” are entitled to a fair trial, and jurors should not allow their personal feelings to prejudice their judgment.
This trial illustrates the complexities surrounding Musk's acquisition of Twitter and the ongoing debates regarding the integrity of information on social media platforms. As the case unfolds, both sides await the jury's verdict with significant implications for investor trust and corporate governance in the tech industry.
