A U.S. court has rejected Elon Musk’s request to dismiss a lawsuit accusing him of misleading former Twitter shareholders by delaying the disclosure of his initial investment in the company, now rebranded as X.
Court Rejects Musk’s Dismissal Request
On Friday, U.S. District Judge Andrew Carter in Manhattan ruled that the shareholders presented a valid argument that Musk intentionally committed fraud. They alleged that he used improper regulatory filings, misleading tweets, and a secretive strategy to increase his Twitter stake without early disclosure.
Key Allegations Against Musk
The lawsuit, led by the Oklahoma Firefighters Pension and Retirement System, claims that Musk failed to meet the SEC’s March 24, 2022, deadline to disclose his 5% stake in Twitter. Instead, he waited until April 4, 2022, to reveal his 9.2% stake. This delay allegedly saved him over $200 million while harming other investors who sold their shares at lower prices.
Judge’s Findings and Key Tweets
Judge Carter noted that Musk’s filing about his 9.2% stake could have been misleading since it suggested a passive investment rather than an attempt to acquire Twitter. The judge also allowed shareholders to challenge two tweets Elon Musk posted on March 26, 2022. In one, he said he was “giving serious thought” to creating a Twitter competitor. In another, he responded to a suggestion about buying Twitter and changing its bird logo to a doge with, “Ha ha that would [be] sickkk.”
Musk’s legal team argued that these tweets undermined any intent to commit fraud, as they could have drawn unwanted attention to his involvement with Twitter. However, Carter found the shareholders’ claims to be equally compelling.
Impact on Twitter Shares and Ongoing SEC Case
Following Musk’s disclosure of his stake, Twitter’s stock price surged by 27% on April 4, 2022. Later that year, in October 2022, he completed the full acquisition of Twitter for $44 billion. Meanwhile, the SEC has also sued Musk for failing to disclose his investment on time.
The case, Oklahoma Firefighters Pension and Retirement System v. Musk et al, is being heard in the U.S. District Court, Southern District of New York (No. 22-0302
