Elon Musk to Face Lawsuit Over Delayed Twitter Share DisclosureElon Musk to Face Lawsuit Over Delayed Twitter Share Disclosure

A U.S. district judge has ruled that Elon Musk must face a lawsuit alleging that he defrauded former Twitter shareholders by delaying the disclosure of his investment in the social media company, which he later acquired and renamed X.

In a decision disclosed on Monday, U.S. District Judge Andrew Carter stated that shareholders in the proposed class action can attempt to demonstrate that Musk had the intention to defraud them by waiting 11 days beyond the U.S. Securities and Exchange Commission (SEC) deadline to reveal his purchase of 5% of Twitter's shares.

However, the judge in Manhattan dismissed an insider trading claim against Musk, who is currently the world's wealthiest individual.

Musk's lawyers have not yet responded to requests for comment as of Tuesday.

The lawsuit, led by an Oklahoma firefighters pension fund, alleges that Musk saved over $200 million by increasing his stake in Twitter and engaging in private discussions with the company's executives about his intentions before ultimately disclosing a 9.2% ownership in April 2022. Shareholders also claim that they sold Twitter shares at artificially low prices because Musk concealed his actions.

Musk's legal team argued that their client is "one of the busiest people on the planet" and that any failure to disclose was "inadvertent."

Judge Carter, however, concluded that it could not be inferred that Musk was "too busy" to comply with SEC regulations, given that he found time to purchase Twitter shares, meet with company executives, and make online posts about Twitter. Additionally, the judge found evidence that Musk understood the 5% disclosure rule, including his previous sworn testimony and proper disclosures of stakes in his electric car company, Tesla, and the former SolarCity on at least 20 occasions.

Katie Sinderson, an attorney for the plaintiffs, declined to provide comments.

Musk acquired Twitter for $44 billion in October of the previous year. According to SEC regulations, investors must disclose their acquisition of 5% of a company's shares within 10 days.

On April 4, 2022, Twitter's stock price surged by 27%, rising from $39.31 to $49.97, after Musk revealed his 9.2% stake. This acquisition valued Twitter at $54.20 per share.

The case is titled Oklahoma Firefighters Pension and Retirement System v. Musk et al, and it is pending in the U.S. District Court for the Southern District of New York, under the case number 22-03026.