Elon Musk has moved to dismiss a lawsuit filed by former Twitter shareholders, who accuse him of delaying the disclosure of his significant ownership stake in the social media platform in early 2022. According to Musk, the delay was an unintentional mistake rather than an attempt to deceive.
In a late Wednesday filing in Manhattan federal court, Musk argued that it was implausible to believe he intended to defraud shareholders who were unaware of his 9.2% stake in Twitter, causing them to miss out on significant gains when they sold their stock.
The investors in the proposed class action claim that Musk, along with his wealth manager Jared Birchall, knowingly violated a U.S. Securities and Exchange Commission (SEC) rule requiring disclosure of his 5% stake by March 24, 2022. Instead, Musk waited an additional 11 days, during which time he acquired more shares at lower prices, allegedly saving over $200 million. Twitter, now rebranded as X, saw a 27% increase in its stock price on April 4, 2022, following Musk’s announcement of his 9.2% stake.
Forbes magazine lists Musk as the world’s wealthiest individual. He also heads several other companies, including Tesla, the electric car manufacturer.
In his court filing, Musk explained that he had planned to disclose his Twitter stake by the end of 2022 but acted promptly upon realizing he had misunderstood the SEC’s disclosure requirements. “This is not a scheme to defraud,” Musk stated. “All indications—including those in the pleadings—point to a mistake.”
Musk also refuted the investors’ allegation that a Morgan Stanley banker helped create a trading strategy to acquire Twitter shares covertly.
The investors, represented by an Oklahoma public pension fund, have not responded to requests for comment.
Musk completed the purchase of San Francisco-based Twitter for $44 billion in October 2022. The SEC has also investigated his Twitter stock acquisitions.
Last September, U.S. District Judge Andrew Carter declined to dismiss an earlier version of the lawsuit, citing evidence that Musk was aware of the SEC disclosure rules and had testified about them under oath.
The case is Oklahoma Firefighters Pension and Retirement System v. Musk et al, U.S. District Court, Southern District of New York, No. 22-03026.
