By Jonathan Stempel
NEW YORK (Reuters) – Elon Musk is seeking to dismiss a lawsuit filed by former Twitter shareholders who said he waited too long until early 2022 to disclose his large stake in the social media company, saying “all indications” show his delay was a mistake.
In a filing Wednesday night in Manhattan federal court, Musk said it was implausible to believe he wanted to defraud shareholders who were unaware he had acquired a 9.2% stake in Twitter and missed out on big gains because they sold their own shares.
Investors in the proposed class action lawsuit said Musk and his estate manager, Jared Birchall, knew that a U.S. Securities and Exchange Commission rule required Musk to disclose by March 24, 2022, that he had purchased 5% of Twitter, but waited another 11 days.
Investors said this allowed Musk to buy more shares at cheap prices, saving him more than $200 million. Twitter, now known as X, rose 27% on April 4, 2022 after Musk disclosed his 9.2% stake.
Musk is the richest person in the world according to Forbes magazine and runs other companies, including electric carmaker Tesla.
In his filing, Musk said he intended to disclose his stake in Twitter in late 2022, but he quickly disclosed it after realizing he had misunderstood the SEC’s disclosure rule.
“This is not a fraud scheme,” Musk said. “All indications, including those in the allegations, point to an error.”
Musk also denied investors’ claim that an unnamed Morgan Stanley banker helped devise a trading strategy to accumulate Twitter shares without alerting the broader market.
Lawyers for the investors, led by an Oklahoma public pension fund, did not immediately respond to requests for comment Friday.
Musk eventually bought San Francisco-based Twitter for $44 billion in October 2022. The SEC has also investigated his purchases of Twitter stock.
Last September, U.S. District Judge Andrew Carter declined to dismiss an earlier version of the lawsuit, finding evidence that Musk understood the SEC disclosure and testified about it under oath.
The case is Oklahoma Firefighters Pension and Retirement System v Musk et al, United States District Court, Southern District of New York, No. 22-03026.
(Reporting by Jonathan Stempel in New York; editing by Chizu Nomiyama)
