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Musk Acknowledges Twitter Disclosure Error, Aims to Dismiss Lawsuit

Musk Acknowledges Twitter Disclosure Error, Aims to Dismiss Lawsuit

Elon Musk seeks to dismiss a lawsuit filed by former Twitter shareholders, who accuse him of delaying the disclosure of his significant ownership stake in Twitter (now known as X) in early 2022. Musk claims that any delay in revealing his 9.2% stake was an honest mistake, not an attempt to defraud shareholders. 

In a recent filing in Manhattan federal court, Musk argued that it is implausible to believe he intended to defraud shareholders by delaying the disclosure, which ultimately caused them to miss out on significant gains after they sold their stock. The investors, in their proposed class action, assert that Musk and his wealth manager, Jared Birchall, were aware of the SEC rule requiring disclosure by March 24, 2022, yet waited an additional 11 days. This delay allegedly allowed Musk to buy more shares at lower prices, saving over $200 million. On April 4, 2022, when Musk finally disclosed his 9.2% stake, Twitter’s stock surged by 27%.

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Musk, the world’s richest person according to Forbes, who also runs Tesla and other companies, said he had initially planned to reveal his stake at the end of 2022 but disclosed it promptly after realizing his misunderstanding of the SEC rule. “This is not a scheme to defraud,” Musk stated, emphasizing that all evidence, including the pleadings, points to a mistake.

The lawsuit also claims that an unnamed Morgan Stanley banker helped Musk develop a strategy to acquire Twitter shares without alerting the market. Musk denies this allegation.

The investors, led by an Oklahoma public pension fund, have not yet commented on Musk’s latest filing. 

Musk eventually purchased Twitter for $44 billion in October 2022, and the SEC has also investigated his stock purchases. Last September, US District Judge Andrew Carter declined to dismiss an earlier version of the lawsuit, citing evidence that Musk understood and testified about the SEC disclosure rules under oath.