Elon Musk is seeking the dismissal of a lawsuit filed by former Twitter shareholders who allege that he delayed revealing his substantial ownership stake in the social media company, now known as X, in early 2022.
The shareholders claim that Musk and his wealth manager, Jared Birchall, were aware of the SEC requirement to disclose a 5 per cent stake by 24 March 2022, but waited an additional 11 days. This delay allegedly allowed Musk to purchase more shares at lower prices, saving him over USD 200 million. When Musk eventually disclosed his 9.2 per cent stake on 4 April 2022, Twitter's stock price grew by 27 per cent.
In a recent filing in Manhattan federal court, Musk argued that the delay was a mistake rather than a deliberate scheme to defraud shareholders. He stated that he misunderstood the SEC disclosure rule and intended to reveal his stake by the end of 2022, but disclosed it promptly upon realising the error.
Musk also denied the investors' accusation that a Morgan Stanley banker helped devise a strategy to accumulate Twitter shares without alerting the market.
The lawsuit, spearheaded by an Oklahoma public pension fund, faced an initial setback last September when US District Judge Andrew Carter refused to dismiss it, citing evidence that Musk was aware of the SEC disclosure requirements. Musk’s legal team is now challenging this decision, seeking to have the lawsuit dismissed. The SEC has also investigated Musk’s Twitter stock purchases, adding to the scrutiny surrounding the billionaire's actions.
(Inputs from Reuters)
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