Elon Musk must face class action over late disclosure of Twitter stake, judge rules

A federal judge has allowed a class action lawsuit against Elon Musk to proceed, concerning allegations that he defrauded investors by delaying the disclosure of his initial investment in Twitter (now X). Investors, led by the Oklahoma Firefighters Pension and Retirement System, claim Musk waited 11 days past the SEC-mandated deadline to reveal his 5% ownership, ultimately disclosing a 9.2% stake. They allege this delay saved Musk over $200 million while causing them to sell shares at artificially lowered prices. The investors also pointed to Musk’s tweets on March 26, 2022, regarding potentially creating a Twitter rival as influencing their decisions.

Judge Andrew Carter rejected Musk’s argument that investors couldn’t prove reliance on his alleged fraud, stating he didn’t overcome the presumption that his actions affected the share price. The judge also dismissed concerns about measuring damages class-wide, allowing the certification to proceed. This case is separate from another lawsuit in San Francisco where Musk was found liable for attempting to lower the takeover price by questioning Twitter’s bot activity, with damages still to be determined and an appeal expected.

Furthermore, the SEC also filed a lawsuit regarding Musk’s disclosure, and settlement talks are currently underway. This decision exposes Musk to potentially significant financial repercussions if the class action is successful.

(Source：Livemint)