Elon Musk took the witness stand at San Francisco Federal Court Wednesday, offering his defense against allegations that he engaged in a fraudulent campaign against Twitter and its management team in the months before he closed a deal to buy the social media platform for $44 billion in October 2022 and rebranded it X.
Investors, who are seeking as much as $1 billion in damages, are suing Musk, arguing he posted tweets and made statements designed to drive down the value of the company’s shares in order to get a better deal, or abandon his acquisition.
For his appearance at trial, Musk’s handlers tried, and failed, to win their boss a parking spot in the garage beneath the Phillip Burton Federal Building at 450 Golden Gate Ave., which is reserved for officials, judges, and diplomats. Like everyone else, Musk had to enter at the ground level. Unlike the public, he got to skip the security line, and was accompanied by his private detail through the courthouse hallways.
On breaks in the testimony, everyone in the courtroom was asked to wait for Musk to leave first.
Dressed in a black suit and tie, Musk sat with his lawyers, vigorously chewing gum, as he waited for the jury. When he was called to the witness stand, Musk faced shareholders, including John Garrett, an elderly man sitting in his wheelchair beside the lawyers representing him. The shareholders, including Garrett, are part of a class of potentially millions of investors.
By the time Musk took the stand, his gum was gone.
Musk’s lawyers have built his defense on an argument that Twitter was plagued by fake accounts, spam, and bots before he purchased it. Musk repeatedly testified that the company underestimated the number of such accounts at about five percent. Musk, his lawyers claim, was determined to unearth the true figure.
The problem with the argument is that despite whatever his misgivings, on April 25, 2022, Musk signed a “seller-friendly” agreement to buy Twitter at a premium. Musk waived due-diligence, giving up many rights to extract information from the company before buying it.
Jurors were shown previous video testimony Musk made agreeing that the deal didn’t require Twitter to provide data about fake accounts or bots, or explain how it estimated the number of those accounts. Lawyers for the investors argue that the tweets and statements Musk made after signing the agreement systematically eroded Twitter’s share price.
Under questioning from the plaintiffs’ lawyer Aaron Arnzen, Musk testified that he knew he had millions of followers on Twitter. Asked whether he understood that his posts might be “material” to investors and that they could move share prices, Musk repeatedly hedged.
“My tweets perhaps have some effect, but seem to go in random directions. It’s not a certain thing,” Musk said. Sometimes, he testified, he’s posted that Tesla’s shares are overpriced only to watch them go higher.
“I believe in truth and transparency,” Musk testified. “I speak what’s on my mind, the market determines whether it’s material or not.”
Jurors were shown a May 13, 2022 tweet from Musk saying that the Twitter deal was “temporarily on hold,” a key piece of evidence in the case. Twitter shares closed down about nine percent that day. Arnzen asked, perhaps based on quotes in the press from Musk, if this was one of Musk’s “incredibly stupid” tweets?
“It might not have been my wisest tweet,” Musk said, adding that “incredibly stupid” might be too strong. “Although, if it led to this trial, it might qualify as such.”
“I’m not saying ‘I’m not going to do the deal,’” Musk said, explaining the May 13, 2022 tweet. “It’s like saying you’re going to be late for a meeting. But it doesn’t mean that you’re not going to have the meeting.”
Musk ultimately ended up buying Twitter in October 2022 after the company sued him in Delaware to make good on his original offer six months earlier.
Musk’s appearance followed testimony Tuesday from Jared Birchall, who handles his personal finances for his family office in Austin. On the witness stand, Birchall sounded more like a devotee of a cult at a Texas compound than a financial advisor, favorably referring to his boss as a “builder, engineer, creator, and entrepreneur.”
Under questioning from a lawyer representing the plaintiffs, Birchall was stubborn and unyielding, saying he couldn’t remember the facts he was being asked about.
When one of Musk’s lawyers cross-examined him, his answers flowed easily.
Including his security detail, Musk’s home office consists of between 40 and 50 people, Birchall said. “We have grown over the years,” he explained. About 15 members of the group are devoted to the billionaire’s finances. He described a team constantly in motion, juggling the demands of the founder of X, Tesla, SpaceX, Nuralink, and xAI.
Birchall was asked what it’s like working for Musk?
“It’s very inspiring to work on projects and problems that are meant to help the future of humanity,” Birchall, under oath, said.
Birchall testified about a May 6, 2022 meeting Musk had with Twitter’s top executives to discuss the number of fake and spam accounts, and bots, on the platform. Ned Segal, Twitter’s chief financial officer at the time, said the company relied on a manual method to count the number of fake accounts, according to Birchall, who testified that the explanation was “uninspiring and nonsensical.”
Birchall was asked about Musk’s response to Segal’s explanation.
“Did you just hear what I just heard?” Musk said, according to Birchall. The billionaire added: “My spidey senses were right.”
The trial is scheduled to conclude March 19. For the investors to win, they must convince the jury of three women and five men to unanimously conclude that Musk undertook the alleged campaign of tweets and statements with the intent to commit fraud.
