Photo credit: www.cnbc.com
Federal Court Allows Class-Action Lawsuit Against Elon Musk to Proceed
A federal judge has ruled that a class-action lawsuit against Elon Musk and his family office, Excession, can continue in court, dismissing Musk’s attempts to have the case thrown out. The ruling was issued on Friday and marks a significant development in a case involving former Twitter shareholders.
The lawsuit, known as Rasella v. Musk (Case No. 1:22-cv-03026-ALC-GWG), is being heard in the Southern District of New York. The plaintiffs, which include the Oklahoma Firefighters Pension and Retirement System, allege that they incurred financial losses when Musk acquired a substantial stake in Twitter without providing timely disclosure as required by law.
According to the suit, the shareholders claim they sold their Twitter shares at “artificially deflated prices” while Musk concealed his growing interest in the company. The implications of the lawsuit highlight concerns regarding transparency in stock transactions and the responsibilities of high-profile investors.
Musk’s legal team contends that while the disclosure was filed after the Securities and Exchange Commission (SEC) deadline, it represented a mere oversight and did not constitute securities fraud. However, the court’s opinion reflects a different perspective.
In his ruling, Judge Andrew L. Carter stated that he aligns with the plaintiffs’ assertion that Musk’s failure to disclose his Twitter stock purchases affected market pricing. He expressed that Musk’s actions likely sent a “false pricing signal to the market.” The judge also noted a tweet from Musk dated March 26, 2022, where he mentioned considering purchasing another social network, despite already holding millions of Twitter shares as of March 25, 2022. This tweet raised questions about Musk’s intentions and possible misdirection regarding his Twitter investments.
Furthermore, the judge emphasized that it is “more likely than not” that Musk’s social media communications constituted materially misleading representations that could have influenced investors’ decisions.
Lately, Musk completed a highly publicized leveraged buyout of Twitter in 2022, valued at approximately $44 billion. Following the acquisition, he implemented significant changes to the platform, which has since been rebranded as X.
Adding to the ongoing discussions surrounding Musk’s ventures, he announced on Friday that his latest project, xAI, would merge with X in an all-stock transaction. This development positions xAI’s valuation at $80 billion while estimating the social media entity at $33 billion.
This lawsuit and the scrutiny surrounding Musk’s actions underscore the ongoing issues related to investor transparency and the regulatory environment governing significant financial transactions in the tech industry.
Source
www.cnbc.com