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Billionaire Elon Musk is looking to dismiss a lawsuit brought by former Twitter shareholders who said he took too long to reveal his ownership stake in the social media company before he moved to buy Twitter and take the company private.
Musk told a Manhattan federal court in a filing late Wednesday that “all indications” show his delay in making the disclosure, which was required by Securities and Exchange Commission (SEC) rules. The proposed class action lawsuit was filed by an Oklahoma public pension fund representing firefighters.
He argued that it was implausible to believe that he intended to defraud shareholders who didn’t know he had taken a 9.2% stake in Twitter at the time and sold their own stock, which led to them missing out on big gains.
Investors who filed the lawsuit said Musk and his wealth manager Jared Birchall knew that an SEC rule required Musk to disclose that he had acquired more than 5% of Twitter’s stock by March 24, 2022, but that they waited another 11 days despite that requirement.
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Musk was late in disclosing that he had acquired more than 5% of Twitter’s outstanding shares, prompting the SEC investigation and the proposed class action lawsuit. (Apu Gomes / Getty Images)
They argue that this delay allowed Musk to buy more shares at cheap prices, which saved more than $200 million. Twitter, which has been rebranded as X following Musk’s takeover, saw its stock rise by 27% on April 4, 2022, after Musk revealed his 9.2% stake.
In his filing, Musk said he had intended to reveal his Twitter stake at the end of 2022 but disclosed it promptly after realizing he had misunderstood the SEC disclosure rule.
“This is not a scheme to defraud,” Musk said. “All indications – including those in the pleading – point to a mistake.”
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Musk recently agreed to be interviewed by the SEC about his Twitter stock purchases. (Chesnot / Getty Images)
He also denied a claim made by investors that an unnamed Morgan Stanley banker helped devise a trading scheme to amass Twitter shares at “artificially depressed prices” without alerting the broader market.
The SEC is also investigating Musk’s purchases of Twitter stock in 2022.
In late May, Musk agreed to testify before the SEC on the topic at an undisclosed date after he had previously sought to dismiss the regulator’s probe and refused to sit for an interview with the SEC in September 2023.
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Musk said his late disclosure of Twitter stock purchases was due to a misunderstanding of SEC rules and that he promptly made the disclosure once he realized the error. (Slaven Vlasic/for The New York Times / Getty Images)
An ownership group led by Musk eventually bought Twitter for $44 billion in October 2022 and took the company private.
That followed a legal battle in which Musk sought to back out of the deal on the grounds that his due diligence revealed a large amount of spam and bot accounts. Twitter sued Musk to enforce the acquisition agreement they had reached; Musk relented and went ahead with the deal before the case went to trial.
Reuters contributed to this report.
