Musk faces $2.6 billion compensation liability over Twitter post "substantially false"

Investing.com - A California jury has issued a stern ruling against billionaire Elon Musk, finding that he misled investors during the tumultuous process of acquiring the platform formerly known as Twitter for $44 billion.

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According to the ruling released in the Friday class-action lawsuit against Musk in the Pampena case, the jury unanimously found that Musk made materially false social media posts in May 2022 regarding the status of the deal.

While the jury did not explicitly classify his actions as part of a “fraudulent scheme,” the plaintiff’s attorneys indicated that total damages could reach as high as $2.6 billion.

Questioning the “Robot” Claim

The core of the lawsuit revolves around Musk’s May 2022 claim that the acquisition was “temporarily on hold” while reviews of fake accounts and spam bots were conducted. This statement caused Twitter’s stock to drop nearly 10%.

Shareholders argued that Musk’s change of tone was not due to bot issues but was a tactical move to pressure the board to lower the price, amid broader market downturns affecting his wealth tied to Tesla (NASDAQ: TSLA).

Plaintiff attorney Joseph Kochet stated in an interview with CNBC, “This is a good example of why you can’t treat ordinary investors this way.” He emphasized the impact on retail investors and pension funds. The jury’s findings specifically pointed to Musk’s tweets on May 13 and May 17 as the main causes of investor losses.

However, Musk’s defense team described the ruling as “a bump in the road,” asserting that the billionaire’s concerns about the platform’s integrity are well-founded, and vowed to seek redress on appeal.

Minimal Impact on $650 Billion Wealth

Despite potentially facing billions in damages, the financial impact on Musk is largely symbolic. His current net worth is estimated at $650 billion, and a $2.6 billion judgment represents only a small fraction of his overall liquidity.

Since the acquisition, Musk has thoroughly reorganized the entity, rebranding it as X and merging it with xAI and SpaceX, effectively integrating this social media platform into his broader tech empire.

This ruling marks a milestone in the regulation of “CEO as influencer.” It underscores the increasing legal responsibility of executives when posting on social media, even when these platforms are considered their personal property.

As claims management procedures commence, investors who sold shares below the $54.20 purchase price due to these tweets may begin recovering losses in the coming months, representing a rare victory for retail investors against dominant corporate figures.

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