A US judge has ordered Elon Musk to 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.
The judge, Andrew Carter, stated that shareholders in the proposed class action can attempt to prove that Musk intended to deceive them by waiting 11 days beyond the Securities and Exchange Commission deadline to reveal his 5% ownership of Twitter. The judge also dismissed an insider trading claim against Musk. Shareholders, led by an Oklahoma firefighters pension fund, allege that Musk saved over $200 million by increasing his Twitter stake and discussing his plans with its executives secretly before finally disclosing a 9.2% stake in April 2022.
They claim that Musk’s actions caused them to sell Twitter shares at artificially low prices. Musk’s lawyers argued that any disclosure failure was unintentional, citing his busy schedule. However, the judge disagreed, pointing out Musk’s understanding of the 5% disclosure rule and his previous compliance with SEC rules. Musk acquired Twitter for $44 billion in October, and his delayed disclosure significantly affected the stock’s price.
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