Elon Musk took the witness stand Wednesday in San Francisco federal court — wearing a black suit and tie, not a Tesla hoodie — to defend himself in a class-action securities fraud trial brought by former Twitter shareholders. The case centers on one of the messiest corporate deals in recent memory: Musk’s on-again, off-again, $44 billion acquisition of Twitter in 2022. But the trial’s real audience isn’t just Twitter investors. It’s anyone with a stake in Tesla.

The Fact: Twitter shareholders who sold stock between May 13 and October 4, 2022 allege Musk deliberately manipulated Twitter’s share price — through a sustained public campaign questioning the platform’s bot counts — to escape or renegotiate his $54.20-per-share deal.
The Delta: Musk admitted under oath that he completed the Twitter deal because his own lawyers told him the Delaware judge assigned to the case was “extremely biased” against him — not because he believed in the deal.
The Tesla Angle: This trial adds to a stack of legal and reputational risks already weighing on Tesla sales, brand perception, and stock. It won’t resolve quickly.

The Twitter Trial, Explained for Tesla Investors

The class-action lawsuit covers Twitter shareholders who sold their stock between May 13 and October 4, 2022 — the window during which Musk publicly questioned the deal, raised bot allegations, and eventually backed out entirely before reversing course and completing the $44 billion purchase. Plaintiffs argue they sold at artificially depressed prices caused by Musk’s deliberate public statements, costing them the difference between what they received and the $54.20 per share Musk ultimately paid.

The key moment: a May 2022 tweet declaring the deal “temporarily on hold.” Twitter’s stock dropped as much as 20% within 24 hours. When asked about it Wednesday, Musk said, “It may not be my wisest tweet.” He also offered this in his defense of his social media habits: “The stock market is like a manic depressive.”

Plaintiffs’ attorney Mark Molumphy was less philosophical. “We’re here today because Elon Musk cheated investors,” he said in opening statements Monday. “The evidence will show Mr. Musk knew exactly what he was doing.”

Musk’s defense team argues his bot concerns were genuine, pointing out that Twitter itself had paid $809.5 million in 2021 to settle claims it overstated user growth and monthly active figures. That’s a real data point. But it doesn’t fully explain why Musk tweeted publicly — to his tens of millions of followers — rather than pursue his concerns through legal or contractual channels.

One of the more telling moments from Wednesday’s testimony came when Musk explained why he ultimately went through with the deal at the original price. It wasn’t conviction. It was litigation strategy. His lawyers, he said, advised him that Delaware Chancery Court Chancellor Kathleen McCormick was “extremely biased” against him and he stood little chance of winning there. By tying that reasoning to attorney-client conversations, he limited how far opposing counsel could dig into his actual thinking.

Judge Charles Breyer flagged that there may be other evidence suggesting Musk reached that conclusion independently — which could waive the privilege. He said he would rule on it later in the trial, which is scheduled to continue through March 19.

Jury Selection Already Signaled the Musk Reputation Problem

Before testimony even began, nearly half of the prospective jurors were dismissed for holding strong negative opinions of Musk — a striking number that reflects how his public profile has shifted since 2022. Musk has long been a polarizing figure. But the degree of pre-existing hostility in a jury pool is a concrete, measurable indicator of brand damage, not just a poll number.

That brand damage is already showing up in Tesla’s numbers. Tesla’s European sales cratered in late 2025, and Tesla’s reputation dropped to 95th out of 100 most visible U.S. companies in the 2025 Axios Harris Poll. French Tesla owners went further — filing a lawsuit against Tesla directly over Musk’s political positions.

This trial adds another chapter to a story that is already hurting Tesla in the showroom.

Musk’s Legal Exposure Extends Well Beyond This Case

This isn’t Musk’s first time defending himself against securities-related allegations in a San Francisco federal courtroom. Three years ago, he spent about eight hours testifying about a 2018 tweet claiming he had “funding secured” to take Tesla private at $420 per share — a deal that never happened. A jury cleared him in that case. This time, the evidence trail is more documented and the jury pool more hostile.

There’s also a separate SEC case pending, alleging Musk violated disclosure requirements by not reporting his Twitter stake on time. As of early 2026, that case has not been resolved. If the current jury rules against him, legal analysts expect it could strengthen other pending claims.

Meanwhile, the institutional picture around Tesla keeps shifting. Toyota and Stellantis both exited Tesla’s EU CO₂ credit pool for 2026 — a quiet but meaningful signal that partners are reassessing their association with the brand. BYD outsold Tesla by 620,000 vehicles in 2025, and the gap grew across the year.

The Q4 2025 earnings report showed Tesla’s net income fell 61% year-over-year. That number predates the trial.

What Tesla’s Texas Move Tells Us About Musk’s Legal Strategy

Musk’s distrust of Delaware courts isn’t abstract. When Tesla reincorporated from Delaware to Texas in 2024, Musk framed it as escaping hostile courts. Chancellor McCormick later voided his Tesla pay package — a ruling the Delaware Supreme Court eventually overturned — and her name is now part of Musk’s sworn testimony in federal court. Worth noting: McCormick’s Tesla pay ruling came in January 2024, about 15 months after Musk closed the Twitter deal. His lawyers’ “extremely biased” warning was anticipatory. The ruling against him came later. That sequence makes the claim harder to verify but doesn’t make it implausible — McCormick’s record in high-profile corporate cases was well-established before either ruling.

The pattern here matters: Musk regularly invokes judicial bias as an explanation for his legal decisions. Whether that defense resonates with a San Francisco jury remains to be seen. The trial runs through March 19.

EVXL’s Take

There’s a version of this story where Musk wins the case, pays nothing, and Tesla’s stock shrugs. It’s happened before. But even a legal win doesn’t fix the underlying problem: every week Musk spends in a San Francisco courtroom defending his conduct from 2022 is another week of headlines that have nothing to do with the Model Y, the Cybercab, or Optimus.

The detail that stood out most from Wednesday’s testimony wasn’t the “manic depressive” stock market quote. It was this: Musk says he paid $44 billion for Twitter because his lawyers told him the judge was against him. Not because he believed in the asset. Not because the deal made financial sense. Because he calculated he’d lose in court. That’s a revealing answer for someone who runs a public company where investor trust is a core asset.

Tesla’s brand problems and Musk’s legal exposure aren’t separate issues. They compound each other. Tesla’s stock climbed more than 5% in April 2025 when Musk pledged to refocus on the company — which tells you exactly how much the market prices in his attention as a variable. Now that attention is split between DOGE, xAI, SpaceX, and a federal courtroom.

One thing to keep straight: this lawsuit is against Musk personally, not Tesla. A verdict against him carries no direct financial liability for Tesla shareholders. The stock risk is reputational, not balance-sheet. That distinction matters for how you read the next paragraph.

My call: if the jury rules against Musk, expect Tesla shares to dip within the first trading session. Not because of direct financial exposure, but because it confirms a pattern of misconduct at the top that the market has been discounting unevenly. That outcome would also give the SEC’s separate disclosure case more momentum. Watch for a verdict before the end of March.

Sources: The Guardian, AP News

Editorial Note: AI tools were used to assist with research and archive retrieval for this article. All reporting, analysis, and editorial perspectives are by Haye Kesteloo.