Elon Musk must face class action over late disclosure of Twitter stake, judge rules
The judge said Musk did not overcome the presumption that his alleged misrepresentations affected Twitter’s share price
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[NEW YORK] A federal judge on Tuesday said former Twitter investors who accused Elon Musk of defrauding them by waiting too long to disclose his initial investment in the social media company may pursue their case as a class action.
The decision by US District Judge Andrew Carter in Manhattan exposes the world’s richest person to potentially greater damages than if investors were forced to sue individually.
Lawyers for Musk did not immediately respond to requests for comment. Musk bought Twitter for US$44 billion in October 2022 and renamed it X.
Investors led by the Oklahoma Firefighters Pension and Retirement System said Musk ignored a March 24, 2022 deadline set by US Securities and Exchange Commission rules to reveal he owned 5 per cent of Twitter shares, and waited 11 more days before disclosing a 9.2 per cent stake.
The investors said Musk saved more than US$200 million, and cheated them because they sold Twitter shares at depressed prices during the 11-day period.
Investors said they relied on two March 26, 2022, tweets, where Musk said he was “giving serious thought” to creating a Twitter rival, and said “Haha that would be sickkk” after someone suggested he buy Twitter and change its bird logo to a doge image.
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In opposing class certification, Musk said investors could not prove they relied on his alleged fraud.
But the judge said Musk did not overcome the presumption that his alleged misrepresentations affected Twitter’s share price, and that the investors relied on his silence.
Carter also said the inability to measure damages classwide did not mean a class could not be certified.
The case is separate from a lawsuit in San Francisco federal court, where a jury found Musk liable on March 20 for trying to drive the takeover price down by questioning whether Twitter was overrun by fake and spam accounts, or bots.
Damages have yet to be determined. Musk is expected to appeal.
The SEC also sued Musk over his disclosure of his 5 per cent Twitter stake. Both sides disclosed on March 17 that settlement talks were ongoing. REUTERS
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