Elon Musk Faces Lawsuit Alleging Fraud Against Twitter Shareholders
Elon Musk, the renowned billionaire entrepreneur, has been ordered by a US judge to confront a substantial portion of a lawsuit filed against him. The legal action accuses Musk of defrauding former Twitter shareholders by delaying the disclosure of his investment in the social media giant. The lawsuit claims that Musk intentionally waited 11 days after the US Securities and Exchange Commission (SEC) deadline to reveal that he had acquired 5% of Twitter’s shares. The US District Judge Andrew Carter ruled that the shareholders involved in the proposed class action have the right to prove their allegations of fraud against Musk.
Accusations of Delayed Disclosure and Fraudulent Intent
According to the lawsuit, shareholders led by the Oklahoma firefighters pension fund argue that Musk’s delay in disclosing his investment allowed him to save more than $200 million. Furthermore, they claim that Musk engaged in secretive discussions with Twitter executives regarding his plans before finally announcing a significant stake in the company in April 2022. The shareholders also assert that they were forced to sell their Twitter shares at artificially low prices because Musk concealed his intentions.
Musk’s legal team sought to defend their client by arguing that any failure to disclose was inadvertent, asserting that Musk was “one of the busiest people on the planet.” However, Judge Carter dismissed this argument, stating that if Musk could find time to purchase Twitter shares, meet with company executives, and post online about Twitter, then he could not claim to be too busy to comply with SEC rules.
Evidence of Musk’s Understanding of Disclosure Rules
Judge Carter examined the evidence, which includes Musk’s previous testimony under oath, to conclude that Musk understood the 5% disclosure rule. Additionally, Musk had consistently adhered to this rule, having properly disclosed stakes in his other ventures, such as his electric car company Tesla and the former SolarCity, at least 20 times. These findings further strengthened the shareholders’ case against Musk.
Twitter Share Prices and Musk’s Acquisition
On April 4, 2022, Twitter’s share prices experienced a significant surge of 27% after Musk publicly disclosed his stake of 9.2% in the company. This disclosure valued Twitter at $54.20 per share. Musk’s acquisition of Twitter occurred in October 2021, when he purchased the social media platform for a staggering $44 billion. It is important to note that under SEC regulations, investors have a 10-day window to disclose when they acquire more than 5% of a company.
Judge Dismisses Insider Trading Claim
In addition to the fraud allegations, the lawsuit also included an insider trading claim against Musk. However, Judge Carter dismissed this claim. Despite the dismissal of the insider trading accusation, the fraud allegations will proceed.
Lawyers’ Response and Conclusion
Musk’s lawyers have not provided an immediate response to the judge’s decision. The case, titled Oklahoma Firefighters Pension and Retirement System v. Musk et al, is ongoing in the US District Court for the Southern District of New York.
In conclusion, Elon Musk now faces a legal battle against former Twitter shareholders who accuse him of defrauding them by delaying the disclosure of his significant investment in the company. The court’s ruling allows the plaintiffs to move forward and present evidence to support their allegations of fraud. With the case ongoing, the outcome will determine the implications for Musk and the shareholders involved.