A defiant Elon Musk on Wednesday took the stand in a jury trial to defend himself against accusations that he engaged in a pattern of deceptive behavior that misled investors as he attempted to back out of his $44 billion deal to buy Twitter before he finally completed the takeover.
The civil trial in San Francisco centers on a class-action lawsuit filed just before Musk took control of Twitter, a social media service he renamed X, in October 2022, six months after agreeing to buy the embattled company for $44 billion, or $54.20 per share. The price paid by the world’s richest man represents sliver of a fortune now estimated at $841 billion.
The case, which represents Twitter shareholders who sold the stock between May 13 and Oct. 4, 2022, revolves around allegations that Musk violated federal securities laws while taking a series of calculated steps to drive down the company’s stock price in an attempt to either blow up the deal or wrangle a lower sales price.
Musk maintained the deal merited re-negotiation or termination while insisting Twitter’s board duped him about the percentage of fake, or “bot,” account on its platform — a stance he took again during his Wednesday testimony in a black suit and a tie.
When asked if he had threatened to “hunt down” Twitter’s board unless they returned to the negotiating table to discuss a revised sales price, Musk didn’t rule out that possibility in an answer that reflected the acrimony surrounding the deal.
“There were a lot of threats going back and forth from both sides,” Musk said. “I was pretty upset with the Twitter board because I felt they had engaged in 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.
In Wednesday testimony, Musk repeatedly described the information that Twitter’s board provided with an abbreviation for a bull’s scatology. “I did make it clear that I thought it was BS,” Musk said of Twitter’s calculations asserting that only about 5% if its accounts were bots.
But the allegations in the case accuse of Musk making a series of misleading statements about the Twitter deal before he served notice in July 2022 that he was pulling the plug on the deal.
After Musk backed out, Twitter went to court in Delaware to force him to honor 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.
Musk testified Wednesday that he ended up completing the deal because his lawyers advised him that Delaware Chancery Court Chancellor Kathleen St. Jude McCormick, the judge in charge of the case, was “extremely biased” against him and he had no chance of prevailing.
He pointed out that McCormick voided a $55 billion pay package awarded to him as CEO of electric automaker Tesla, but that decision wasn’t made until January 2024 — 15 months after he completed the Twitter takeover. The Delaware Supreme Court overturned McCormick’s ruling late last year.
By tying his belief that McCormick was biased against him to his lawyers, Musk insulated himself from extensive questioning about the decision through legal protections shielding discussions between attorneys and their clients.
But U.S. District Judge Charles Breyer on Wednesday cited other evidence that Musk may have personally concluded McCormick was biased, which could lift attorney-client privilege. Breyer indicated he may rule on the matter later in the trial currently scheduled to continue through March 19.
In his testimony, Musk asserted that his decision to follow through on the deal at the original sales price provided a huge windfall for most Twitter shareholders.
But Twitter’s shares fell below $33, or about 40% below Musk’s original purchase price, while the deal was hanging in limbo. That downturn costs shareholders who sold their stock during the uncertainty caused by what the lawsuit alleges was Musk’s deceitful behavior.
“I can’t control whether people sell their stock, but everyone who held the stock fared extremely well,” Musk said.
This isn’t the first time that Musk has been dragged into court to defend himself against allegations of duping investors with his social media posts. Three years ago, Musk spent about eight hours testifying in a San Francisco federal trial about his plans to buy Tesla — the electric automaker that he still runs as publicly traded company — for $420 per share in a proposed 2018 deal that never materialized. A nine-member jury absolved Musk of wrongdoing in that case.
Before his Wednesday testimony concluded, Musk acknowledged that his frequent posts on social media probably reveal too much about what his going on his mind.
“What I think privately is what I say publicly,” Musk said.
Musk is expected to return to court Thursday to continue his testimony.
—Barbara Ortutay and Michael Liedtke, AP Technology Writers