Elon Musk has requested that a federal judge in New York dismiss a lawsuit filed by shareholders of Twitter, the platform that is now known as X. He contends that the delayed disclosure of his stake in the social media company was a "mistake."
In April 2022, the billionaire businessman was sued by Twitter shareholders for disclosing that he had acquired a 9.2 percent stake in the company.
Elon Musk Seeks Dismissal of X Shareholders' Lawsuit
Nevertheless, Musk claimed that he had misinterpreted the Securities and Exchange Commission's disclosure rule, mistakenly believing that it was not mandatory until the conclusion of 2022.
According to investors in Twitter, there are allegations that Musk and his wealth manager Jared Birchall deliberately deceived investors by delaying the disclosure of Musk's 5% stake in Twitter for an additional 11 days after the SEC's March 24, 2022 deadline.
Federal securities laws stated that Musk was required to disclose his stake in Twitter within 10 days. However, he failed to file with the SEC until three weeks later, Washington Examiner reported.
According to federal securities laws, it was required for Musk to disclose his stake in Twitter within ten days of it reaching five percent of the company's stock. Musk submitted the necessary paperwork to the Securities and Exchange Commission (SEC) approximately three weeks after surpassing that milestone in March 2022.
According to the shareholders, there are allegations that Musk and his wealth manager engaged in a scheme to violate Musk's disclosure obligations. The purpose of this alleged scheme was to secretly acquire a significant position in Twitter at artificially low prices, all while deceiving investors.
However, according to Musk's lawyers, the delay was a minor mistake and they believe that the shareholders' class-action suit should be dismissed.
The filing states that the plaintiff's case revolves around determining whether the defendants' delay in filing a Rule 13 disclosure was due to a mistake or if it was part of a scheme to defraud investors within a limited timeframe.
Judge Claims Elon Musk is Aware of SEC Rules
Musk made additional purchases of shares, and as of April 4, 2022, he disclosed his ownership of a 9.2% stake in the company. Share prices soared by 27% following the revelation of Musk's ownership. According to reports, Musk managed to save over $200 million during the period between his initial investment and publicly announcing his stake.
Investors who had sold their shares before Musk's disclosure expressed their regret for missing out on significant gains. They believed that Musk and Birchall had engaged in a scheme to evade Musk's disclosure obligations, allowing them to accumulate a substantial position in Twitter at artificially low prices, all while misleading investors.
In October 2022, Musk acquired San Francisco-based Twitter for a staggering $44 billion. The SEC has also investigated his stock purchases made on Twitter.
In September of last year, US District Judge Andrew Carter made the decision not to dismiss a previous version of the lawsuit. This was based on evidence that Musk had a clear understanding of the SEC disclosure and had testified about it while under oath.
This case, identified as US District Court, Southern District of New York, No. 22-03026, involves the Oklahoma Firefighters Pension and Retirement System v Musk et al, Reuters reported.
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