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Why Is Musk Seeking to End the Twitter Lawsuit?

Musk Wants to End Lawsuit Over Delayed Twitter Disclosure

Musk Seeking to End the Twitter Lawsuit

Elon Musk is trying to dismiss a lawsuit by former Twitter shareholders. They claimed he took too long in early 2022 to reveal that he owned a large stake in the company. Musk said his delay was a mistake.


In a Wednesday night court filing in Manhattan, Musk argued that it’s unlikely he intended to deceive shareholders. These shareholders, unaware of his 9.2% stake, sold their stocks and missed out on big gains.


The investors argued that Musk and his wealth manager, Jared Birchall, knew that SEC rules required disclosure by March 24, 2022. However, they waited another 11 days. This delay allowed Musk to buy more shares at lower prices, saving over $200 million. Twitter's stock price rose by 27% on April 4, 2022, after Musk revealed his 9.2% stake.


Musk, the world's richest person according to Forbes, also runs companies like Tesla. In his filing, Musk said he planned to reveal his Twitter stake at the end of 2022. He disclosed it earlier after realizing he misunderstood the SEC rule.


"This is not a scheme to defraud," Musk said. "All indications point to a mistake."

Musk also denied the investors' claim that a Morgan Stanley banker secretly helped him buy Twitter shares.


Lawyers for the investors, led by an Oklahoma public pension fund, did not comment on Friday. Musk eventually bought Twitter, now known as X, for $44 billion in October 2022. The SEC also investigated his Twitter stock purchases.


Last September, Judge Andrew Carter refused to dismiss an earlier version of the lawsuit. He found evidence that Musk understood the SEC disclosure rule and testified about it under oath.


The case is Oklahoma Firefighters Pension and Retirement System v. Musk et al, in the U.S. District Court, Southern District of New York, No. 22-03026.


Key Points

  • Musk Admits Mistake: Elon Musk admitted that his delay in revealing his large ownership stake in Twitter was a mistake, not an attempt to deceive shareholders.

  • Lawsuit Over Delay: Former Twitter shareholders sued Musk, claiming his late disclosure allowed him to buy more shares at lower prices, saving over $200 million.

  • SEC Rule Misunderstanding: Musk said he planned to reveal his stake at the end of 2022 but disclosed it earlier after realizing he misunderstood the SEC's disclosure rule.


FAQs

Q1: Why did Elon Musk delay revealing his Twitter ownership?

Elon Musk said the delay was a mistake. He misunderstood the SEC's rule about when to disclose his ownership. He planned to reveal it at the end of 2022 but did so earlier when he realized the error.


Q2: What is the lawsuit about?

Former Twitter shareholders sued Musk, claiming he waited too long to disclose his ownership. They believe this allowed him to buy more shares at lower prices, costing them money.


Q3: How much money did Musk save by delaying the disclosure?

The investors claim that Musk saved over $200 million by delaying the disclosure, as he bought more shares at cheaper prices before the news became public.


Q4: Did Musk try to deceive shareholders?

Musk denies trying to deceive shareholders. He claims all indications, including the court filings, show the delay was a mistake, not a scheme to defraud.


Q5: What did the judge decide about the lawsuit?

Last September, Judge Andrew Carter refused to dismiss the lawsuit. He found evidence that Musk understood the SEC disclosure rule and testified about it under oath.


Reference

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