Claims about bots on social network contradicted company’s public disclosures and are seen as a tactic to apply pressure for a renegotiation
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Elon Musk, the billionaire and CEO of Tesla, is facing a lawsuit from Twitter shareholders stemming from the purchase of the social network in April 2022. They claim he deliberately spread false information about fake accounts on the platform in order to manipulate Twitter’s share price ahead of his takeover. The lawsuit was filed in October 2022. Shareholders argued that Musk violated federal securities laws by making misleading statements that artificially depressed the share price.
Musk initially agreed to buy Twitter for $44 billion (€37.8 billion). He then announced that the deal was on hold because he needed to verify the number of spam and fake accounts. This announcement, together with subsequent tweets from Musk in which he claimed the percentage of fake accounts was high, caused Twitter’s share price to plummet.
According to the lawsuit, Musk’s statements are false and were intended to put pressure on Twitter to reopen negotiations over the deal. It has been pointed out that during the initial talks Musk had waived his right to due diligence, meaning he had accepted the company’s financial information as presented.
Although Twitter had previously reached a settlement in a case over inflating user numbers, the company had consistently disclosed its estimates of the number of bots to the Securities and Exchange Commission. The lawsuit contends that Musk’s public statements about bots were insincere and designed to create a pretext for lowering the purchase price.
In the end, Musk reversed course and agreed to complete the takeover at the original price. His actions, however, have drawn the attention of investors who believe he manipulated the market for personal gain.
This is not Musk’s first lawsuit relating to statements on social media. Back in 2020, a case was brought over his tweets about taking Tesla private. That ultimately ended in his acquittal.
Business AM