Elon Musk, currently recognized as the world’s wealthiest individual by Forbes, is aiming to dismiss a lawsuit from former Twitter shareholders. They allege that Musk delayed disclosing his substantial ownership in the social media giant in early 2022, causing them financial harm.
In a recent filing to the Manhattan federal court late on Wednesday, Musk acknowledged that his delay in revealing his 9.2% stake in Twitter was a mistake. He argued against the shareholders’ claim that he intended to defraud them, stating it was implausible given his actions. Musk clarified that he had initially planned to disclose his stake by the end of 2022 but misunderstood the SEC’s disclosure rule, prompting him to disclose it promptly upon realizing the error.
The investors, who represent a proposed class action including an Oklahoma public pension fund, contend that Musk and his wealth manager Jared Birchall were aware of SEC regulations mandating disclosure by March 24, 2022, upon acquiring 5% of Twitter’s shares. However, they claim Musk waited an additional 11 days, allowing him to purchase more shares at lower prices and saving over $200 million. Notably, Twitter’s stock, now operating under the name X, surged by 27% on April 4, 2022, following Musk’s belated disclosure.
Despite Musk’s assertions, the lawsuit also implicates an unnamed Morgan Stanley banker in allegedly assisting Musk in accumulating Twitter shares without public knowledge, thereby influencing the market unfairly.
This legal tussle comes amidst Musk’s broader business ventures, which include leading electric vehicle manufacturer Tesla. Musk eventually acquired Twitter outright for $44 billion in October 2022, following his initial stake acquisition. The Securities and Exchange Commission (SEC) has also conducted its own investigation into Musk’s Twitter stock purchases.
Earlier judicial decisions have not favored Musk, as evidenced by U.S. District Judge Andrew Carter’s refusal to dismiss an earlier iteration of the lawsuit last September. Judge Carter highlighted evidence suggesting that Musk was aware of the SEC disclosure requirements, even testifying under oath about his understanding.
Representatives for the investors involved in the lawsuit have yet to respond to requests for comment following Musk’s recent court filing. The outcome of this legal battle could have significant implications for how corporate disclosures and shareholder rights are handled in high-profile investment cases.
