Elon Musk has asked a federal court in New York to dismiss a lawsuit brought by shareholders of the social media company Twitter (now known as X), arguing that a delay in disclosing his stake in the company was a “mistake.”
The billionaire was sued by Twitter shareholders in April 2022 after he revealed he had acquired a 9.2% stake in the company.
Under federal securities laws, Musk was supposed to disclose his Twitter stake within 10 days of exceeding 5% but filed with the Securities and Exchange Commission about three weeks after crossing that threshold in March 2022.
The shareholders allege that Musk and his money managers “devised a scheme to violate Musk’s disclosure obligations in order to enable them to secretly build a massive position in Twitter shares at artificially low prices while misleading investors.”
But Musk’s lawyers argued in a filing on Wednesday that the delay was simply a mistake and that the shareholder class action lawsuit should be dismissed.
“Plaintiffs’ case centers on a single question: whether Defendants’ alleged delays in filing Rule 13 disclosures were negligent errors or were part of a scheme to mislead investors for up to seven business days,” the complaint states.
“All indications, including those in the complaint, point to this being false,” it continued.
The plaintiffs alleged that Musk and his money managers misunderstood federal securities regulations and believed they were required to disclose his Twitter shares at the end of the year. After Musk learned of the mistake, he filed by the next business day, according to Wednesday’s filing.
“Such prompt and corrective disclosure, made within seven business days of the purported deadline, is not the material ingredient of a fraudulent scheme to manipulate the market,” the filing said.
Musk is also facing an SEC investigation over his purchase of Twitter shares in April 2022. He lost a months-long legal battle in May to avoid new depositions in the SEC investigation.
