SAN FRANCISCO: Elon Musk continued to defend his actions in the months leading up to his 2022 purchase of Twitter in court Thursday as he faces a class action lawsuit claiming he misled investors and caused them to lose millions of dollars.
The civil trial in San Francisco centres 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 USD 44 billion, or USD 54.20 per share.
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.
This includes Musk's claims about the number of bots on Twitter. Taking the stand for the second day, Musk continued to double down on his assertion that Twitter had a much higher number of fake and spam accounts than the 5 per cent it disclosed in regulatory filings.
The problem of bots and fake accounts on Twitter wasn't new at the time Musk negotiated the deal. The company had paid USD 809.5 million in 2021 to settle claims that 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.
But Musk said the number was much higher, at least 20 per cent, according to some analysts. Saying the bot number was at least this high was like “saying the grass is green or the sky is blue,” Musk said.
Musk was only on the stand briefly, followed by expert witnesses and Twitter's former CEO, Ned Segal. Much of the testimony on Thursday centred on the 5 per cent spam accounts number. Asked if Twitter ever filed false filings to the SEC that misstated its spam numbers, Segal said it did not. He mentioned that the company once restated its finances after it became aware of a mistake in its calculation of daily users. In 2017, Twitter said it had been overstating its monthly user numbers by mistake because it was including users of a third-party app it should not have.
Asked about the 5 per cent spam account rate, Segal said the number was actually closer to 1 per cent. On Wednesday, Musk said Twitter “lied” about the number of bot accounts on its platform, and that the actual number was much higher.