A U.S. judge recently rejected Elon Musk’s request to dismiss a fraud lawsuit filed by former Twitter shareholders. The lawsuit alleges Musk intentionally delayed revealing his initial investment in Twitter, now known as X, to save over $200 million. U.S. District Judge Andrew Carter in Manhattan stated the shareholders’ claims were valid, including accusations of misleading regulatory filings and tweets that misrepresented Musk’s intentions.
Musk’s Misleading Investment Disclosures
The plaintiffs, led by the Oklahoma Firefighters Pension and Retirement System, argue Musk waited 11 days beyond the SEC’s March 2022 deadline to disclose his 9.2% Twitter stake. This delay allegedly led to the sale of Twitter shares at artificially low prices. The case claims Musk’s disclosure suggested a “passive” investment, misleading investors into undervaluing the company.
The Controversial Tweets
Musk’s controversial tweets on March 26, 2022, added to the confusion. He hinted at creating a Twitter rival and responded jokingly to a suggestion of buying Twitter and changing its logo. The judge found that these tweets could have misled investors, strengthening the case for fraud.
Twitter’s Rising Stock After Stake Reveal
After Musk revealed his 9.2% stake, Twitter’s stock surged by 27%, further fueling the allegations of market manipulation. The case will continue as Musk faces both the fraud lawsuit and an ongoing SEC investigation.