Elon Musk Faces Class Action Over Delayed Twitter Stake Disclosure

A federal judge has ruled that former Twitter investors can pursue a class action against Elon Musk for allegedly defrauding them by delaying disclosure of his initial stake in the social media company.

US District Judge Andrew Carter in Manhattan said the decision could expose Musk to higher damages than if investors were forced to file individual lawsuits. Musk, who bought Twitter for $44 billion in October 2022 and rebranded it as X, has not responded to requests for comment.

The investors, led by the Oklahoma Firefighters Pension and Retirement System, argued that Musk missed a March 24, 2022 SEC deadline to reveal he owned 5 per cent of Twitter shares and waited 11 days to disclose a 9.2 per cent stake. They claim his delay cost them millions as Twitter shares traded at lower prices during that period.

Investors cited Musk’s March 26 tweets hinting at creating a Twitter rival and joking about buying Twitter as evidence they relied on his statements. Musk argued that investors could not prove reliance on his alleged misrepresentations.

Judge Carter disagreed, saying Musk failed to show that the presumption of reliance on his silence was overcome. He also ruled that difficulties in measuring damages across the class did not prevent certification.

This case is separate from a San Francisco lawsuit in which a jury found Musk liable in March for attempting to depress Twitter’s takeover price by questioning the platform’s bot and spam account numbers. Damages are yet to be determined, and Musk is expected to appeal.

The SEC has also sued Musk over the same disclosure, with both sides reporting ongoing settlement discussions as of March 17.