Elon Musk has asked a federal judge in New York to dismiss a lawsuit brought by shareholders of Twitter, the platform now known as X, arguing the delayed disclosure of his stake in the social media company was a “mistake.”
The billionaire was sued by Twitter shareholders in April 2022 after revealing he had acquired a 9.2 percent stake in the company.
Under federal securities laws, Musk should have disclosed his stake in Twitter within 10 days of it crossing 5 percent of the company's stock. However, he filed with the Securities and Exchange Commission (SEC) about three weeks after crossing that threshold in March 2022.
The shareholders allege Musk and his wealth manager “schemed to violate Musk’s disclosure obligations so they could secretly build a massive position in Twitter at artificially low prices while deceiving investors.”
However, Musk’s lawyers argued in a filing Wednesday that the delay was a simple error and that the shareholders’ class-action suit should be dismissed.
“Plaintiff's case centers on a single question: whether Defendants' alleged delay in filing a Rule 13 disclosure was the result of a mistake — even a negligent mistake — or, instead, part of a scheme to defraud investors during at most seven trading days,” the filing reads.
“All indications — including those in the pleadings — point to mistake,” it continues.
They argued Musk and his wealth manager misunderstood federal securities rules, believing them to require him to disclose his stake in Twitter at the end of the year. After learning of the mistake, Musk filed by the next trading day, according to Wednesday's filing.
“Such prompt and corrective disclosure — within seven trading days of the purported deadline — is not the stuff of a fraudulent scheme to manipulate the market,” the filing reads.
Musk has also faced scrutiny from the SEC over his purchase of Twitter stock in April 2022. The billionaire lost a months-long legal battle in May to avoid sitting for another deposition in the agency's probe.
