Elon Musk Faces Lawsuit Over Twitter Disclosure Delay

Elon Musk faces a lawsuit after a federal judge allowed Twitter investors to pursue a class-action over his delayed disclosure of his stake in the company. The ruling centers on events from 2022, when Elon Musk disclosed a 5% stake in Twitter 11 days after the U.S. Securities and Exchange Commission deadline. The decision exposes him to potential financial liability, as investors allege that the delay affected share prices and trading outcomes during that period.

Elon Musk Faces Lawsuit Over Disclosure Timing

According to a Reuters report, U.S. District Judge Andrew Carter in Manhattan ruled that Elon Musk did not overcome the presumption that his alleged misstatements impacted Twitter’s share price. As a result, the court allowed investors to proceed as a class. The investors are led by the Oklahoma Firefighters Pension and Retirement System.

According to the allegations, Elon Musk acquired shares at lower prices due to the unknown stake.  Investors claim he saved more than $200 million during the delay. They argue they sold shares at depressed prices during the same 11-day window.

Musk opposed class certification, stating that investors could not prove reliance on his actions. However, the court found that investors could rely on his silence regarding the stake. Judge Carter also stated that challenges in assessing damages across the group do not prevent class certification.

The case also references two tweets from March 26, 2022. In one, Elon Musk said he was “giving serious thought” to creating a Twitter rival. In another, he responded positively to a suggestion to buy Twitter and change its logo.

Musk Faces Dual Legal Pressure as Disclosure Delay Lawsuit Advances

The class action is separate from another legal matter in San Francisco. On March 20, a jury found Elon Musk, whose SpaceX is considering dropping Robinhood from IPO plans, liable for misleading investors through statements about bots during the $44 billion Twitter acquisition. The possibility of damages in that case could reach $2.6 billion, though a final amount has not been determined.

Investors led by the Oklahoma Firefighters Pension and Retirement System alleged that Elon Musk missed a March 24, 2022 disclosure deadline required by the U.S. Securities and Exchange Commission for revealing a 5% stake in Twitter. They stated that Musk delayed the disclosure by 11 days and instead revealed a 9.2% stake, during which period they sold shares at lower prices. The investors claimed the delay allowed Musk to save more than $200 million.

They also pointed to Musk’s March 26 tweets suggesting he was considering building a rival platform, arguing these statements influenced market behavior. In response, Musk said investors could not prove reliance on his actions. However, Judge Andrew Carter ruled that Musk failed to rebut the presumption that his conduct affected Twitter’s share price and confirmed that challenges in calculating damages do not prevent class certification

In addition, the U.S. Securities and Exchange Commission has filed its own lawsuit over the delayed disclosure. Both parties confirmed on March 17 that settlement discussions are ongoing. However, Elon Musk is expected to appeal the class action ruling.

SpaceX IPO Plans Shift Toward Retail Investors

At the same time, Musk has changed plans for a potential SpaceX IPO. Reports show that up to 30% of shares could be allocated to retail investors. This level exceeds the typical 5% to 10% allocation seen in most IPOs.

According to Reuters, SpaceX may submit confidential filings to the SEC within days. Valuation estimates continue to rise. Barron’s reported a possible valuation of over $1.8 trillion, with a $50 billion raise.