Musk faces class action over late Twitter stake disclosure

A federal judge in the United States has ruled that Elon Musk must face a class-action lawsuit filed by former Twitter investors. The decision allows shareholders to collectively pursue claims that the billionaire defrauded them by delaying the disclosure of his significant stake in the social media platform in early 2022.

U.S. District Judge Andrew Carter in Manhattan issued the ruling on Tuesday, exposing Musk to potentially greater financial damages than if he were sued by investors individually. The case, led by the Oklahoma Firefighters Pension and Retirement System, alleges that Musk ignored a March 24, 2022, deadline set by the Securities and Exchange Commission (SEC) to disclose when his ownership in the company reached 5%.

According to the lawsuit, Musk waited an additional 11 days before revealing a 9.2% stake on April 4, 2022. The plaintiffs argue that this delay allowed Musk to save more than $200 million by purchasing additional shares at lower prices, while investors who sold their holdings during that window did so at artificially depressed levels. While Musk’s legal team argued that the class could not prove they relied on his silence, Judge Carter found that the defendant failed to overcome the presumption that his alleged misrepresentations impacted the market price.

This ruling adds to the legal complexities surrounding Musk’s $44 billion acquisition of the platform, which he has since rebranded as X. The SEC is also pursuing its own litigation regarding the disclosure of his 5% stake, though both parties recently indicated that settlement negotiations are underway. Such regulatory scrutiny over financial reporting is a standard requirement for major publicly traded entities, including technology leaders like HP Inc., which must adhere to strict transparency mandates.

The lawsuit also highlights social media activity from March 2022, where Musk appeared to hint at his future plans for the platform.

"giving serious thought"

In another post from that period, he responded positively to a suggestion about acquiring the company and changing its iconic bird logo.

"Haha that would be sickkk"

This class action is separate from a federal case in San Francisco, where a jury recently found Musk liable for attempting to drive down the acquisition price by questioning the platform's data on automated accounts. While damages in the San Francisco matter have yet to be determined, Musk is expected to appeal that verdict.