Elon Musk must face class action over late disclosure of Twitter stake, judge rules
By Jonathan Stempel
NEW YORK, March 31 (Reuters) – Former Twitter investors who accuse Elon Musk of defrauding them by waiting too long to announce his initial investment in the social media company may pursue their case as a class-action lawsuit, a federal judge said on Tuesday.
The ruling by U.S. District Judge Andrew Carter in Manhattan would expose the world’s richest person to potentially greater losses than those faced if investors had to sue individually.
Musk’s lawyers did not immediately respond to requests for comment. Musk bought Twitter for $44 billion in October 2022 and renamed it X.
Investors, led by the Oklahoma Firefighters Retirement and Retirement System, Musk ignored the March 24 2022 deadline set by U.S. Securities and Exchange Commission rules to disclose his ownership of 5% of Twitter shares and waited another 11 days before disclosing a 9.2% stake.
Investors said Musk saved more than $200 million and deceived them by selling Twitter shares at low prices over an 11-day period.
Investors said they relied on two tweets dated March 26, 2022, in which Musk said he was “seriously considering” creating a Twitter rival and said, “Haha that would be bad” after someone suggested he buy Twitter and replace the bird logo with a picture of a dog.
In opposing class certification, Musk said investors could not prove they relied on the alleged fraud.
But the judge said he couldn’t overcome the assumption that Musk’s alleged misrepresentations affected Twitter’s share price and investors relied on his silence.
Carter also said that just because damages cannot be measured on a class-wide basis does not mean a class cannot be certified.
The case is separate from the trial in San Francisco federal court, in which a jury found Musk liable on March 20 for trying to lower the takeover price by questioning whether Twitter was overrun by fake and spam accounts or bots.
Damages have not yet been determined. Musk is expected to appeal.
The SEC also sued Musk over his disclosure of a 5% Twitter stake. Both sides announced on March 17 that reconciliation talks were continuing.
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese)
