Elon Musk’s Twitter profile displayed on a computer screen and Twitter logo displayed on a phone screen are seen in this illustration photo taken in Krakow, Poland on April 9, 2022.
Jakub Porzycki | Nurphoto | Getty Images
A proposed class-action lawsuit against Elon Musk and his family office Excession can proceed in federal court, a judge ruled Friday, after the tech centi-billionaire sought to have the case dismissed.
The case is Rasella v. Musk (Case No. 1:22-cv-03026-ALC-GWG) in the Southern District of New York.
The lawsuit was brought by former Twitter shareholders who allege they lost money when the Tesla and SpaceX CEO was amassing a stake in the social network, but failed to disclose his purchases within a legally-mandated time frame.
The Oklahoma Firefighters Pension and Retirement System and other plaintiffs in the suit complained that they had sold shares of then publicly-traded Twitter at “artificially deflated prices,” while Musk obscured his own interest and stake in the company.
Elon Musk and Jared Birchall did not immediately respond to a request for comment.
Musk’s attorneys have argued that while his disclosure was filed after an SEC-mandated deadline, this was merely an error and that the tech magnate did not commit nor intend securities fraud.
In his opinion, Judge Andrew L. Carter in the Southern District of New York wrote that the court agreed with plaintiffs that Musk’s failure to disclose he was snapping up shares of Twitter sent a “false pricing signal to the market.”
In his 43-page opinion, the judge also noted that Musk had posted a tweet on March 26, 2022 indicating he was thinking about buying a different social network, not Twitter, although he had already amassed millions of shares in Twitter as of March 25, 2022.
He wrote, it was “reasonable” to read Musk’s tweet “as a statement meant to misdirect the public to think that buying Twitter was just a fantasy.” The judge also wrote that, “it is more likely than not that Musk issued a material misleading representation,” with those tweets.
Musk ultimately bid on and led a leveraged buyout of Twitter in 2022 in a deal worth about $44 billion. He made sweeping changes to the business, the social platform and later renamed it X.
As previously reported, the Securities and Exchange Commission filed a similar lawsuit against Musk over alleged failure to properly disclose purchases of Twitter stock in 2022 before he took over the company.
On Friday, Musk said another one of his ventures, xAI, was merging with the social network in an all-stock transaction, valuing the artificial intelligence business at $80 billion and the social media business at $33 billion.