US Judge Permits Class Action Against Elon Musk Over Twitter Investment
A federal judge has ruled that two former Twitter investors can proceed with their case against Elon Musk as a class action lawsuit, marking another significant legal challenge for the billionaire owner of the social media platform now known as X. This decision adds to the mounting legal pressures facing Musk following his controversial acquisition of Twitter in 2022.
Judge Rejects Musk's Arguments in Manhattan Court
According to a Reuters report, U.S. District Judge Andrew Carter in Manhattan determined that Musk failed to overcome the legal presumption that his alleged misrepresentations impacted Twitter's share price. The judge further noted that investors reasonably relied on Musk's silence during the critical period in question.
The core allegation centers on Musk's delayed disclosure of his initial investment in Twitter. Investors claim Musk waited too long to reveal his growing stake in the company, thereby defrauding shareholders who sold their shares at artificially depressed prices.
Separate from Previous Legal Battles
This lawsuit is distinct from another high-profile case in San Francisco federal court, where a jury recently found Musk liable for attempting to drive down Twitter's takeover price. In that proceeding, Musk was accused of questioning whether the platform was overrun by fake accounts and bots to justify a lower acquisition cost.
Specific Allegations from Oklahoma Firefighters Pension Fund
The class action is led by the Oklahoma Firefighters Pension and Retirement System, representing former Twitter investors. Their complaint alleges several specific violations:
- Musk ignored a March 24, 2022 deadline established by SEC rules to disclose his ownership of 5% of Twitter shares
- He waited an additional 11 days before revealing he had acquired a 9.2% stake in the company
- During this 11-day period, investors sold Twitter shares at reduced prices, while Musk allegedly saved more than $200 million through his delayed disclosure
Investors Cite Musk's Social Media Activity
The lawsuit further contends that investors relied on Musk's public statements during this period, particularly two tweets from March 26, 2022. In these posts, Musk stated he was "giving serious thought" to creating a Twitter competitor and responded "Haha that would be sickkk" to a suggestion that he purchase Twitter and change its bird logo to a Doge image.
Musk's Defense and Legal Strategy
In opposing the class certification, Musk argued that investors could not prove they specifically relied on his alleged fraudulent behavior. His legal team maintained that the connection between Musk's actions and investor decisions was too tenuous to support a class action proceeding.
Judge Carter's ruling represents a significant setback for Musk's defense strategy, allowing the case to move forward as a collective action that could potentially involve numerous former Twitter shareholders seeking damages.
The legal proceedings continue as Musk faces multiple fronts of litigation related to his acquisition and management of the social media platform, now operating under the X brand with substantial changes to its business model and content policies.
