Elon Musk, the billionaire CEO of companies like Tesla and SpaceX, has been ordered by a U.S. judge to face a lawsuit alleging that he defrauded former Twitter shareholders. The lawsuit claims that Musk waited too long to disclose his investment in Twitter, which he later bought and renamed X.
In a recent decision, U.S. District Judge Andrew Carter ruled that shareholders in the proposed class-action lawsuit could proceed with their claims that Musk intended to defraud them. The allegations revolve around the fact that Musk waited 11 days past the deadline set by the U.S. Securities and Exchange Commission (SEC) to reveal that he had purchased 5% of Twitter's shares.
However, the judge did dismiss an insider trading claim against Musk. The plaintiffs, led by an Oklahoma firefighters pension fund, argue that Musk saved over $200 million by adding to his Twitter stake and having secret conversations with its executives before finally disclosing a 9.2% stake in April 2022. They also claim that they sold their Twitter shares at artificially low prices because Musk concealed his actions.
Musk's lawyers argued that any failure to disclose was unintentional, stating that their client is "one of the busiest people on the planet." However, Judge Carter rejected this argument, pointing out that Musk had managed to find time to buy Twitter shares, meet with company executives, and even post online about Twitter.
The judge also highlighted evidence that Musk understood the SEC's disclosure rules, as he had testified about it under oath and had properly disclosed stakes in his other ventures, such as Tesla and the former SolarCity, on multiple occasions.
It is worth noting that Musk acquired Twitter last October for a whopping $44 billion. Under SEC rules, investors are required to disclose within 10 days when they acquire 5% or more of a company's shares.
When Musk finally revealed his 9.2% stake in Twitter, the company's shares rose by 27% in a single day. The value of Musk's takeover bid for Twitter was estimated at $54.20 per share.
The lawsuit will now proceed, allowing shareholders to make their case against Musk's alleged fraudulent behavior. It remains to be seen what the outcome of the lawsuit will be and what impact it could have on Musk and his various business ventures.