Elon Musk is preparing for a barrage of lawsuits. A potential class-action lawsuit filed on behalf of former Twitter shareholders is moving forward. Plaintiffs like the Oklahoma Firefighters Pension and Retirement System aren’t backing down. They claim that they incurred monetary damages when Musk bought up shares in Twitter while failing to disclose key information. A federal judge denied Musk’s motion to dismiss the case, ensuring that the proceedings could move forward.
This isn’t the first time that Musk has been sued by the Securities and Exchange Commission. They alleged that he provided insufficient disclosure on his 2022 Twitter stock purchases. Musk’s lawyers claimed that the late disclosure was just an honest mistake outside of an SEC-required deadline. In finding for the plaintiffs, however, the court found that the omission did indeed create a misleading pricing signal into the market.
Musk’s Social Media Provocations
Musk’s social media provocations haven’t helped either. It all started last March 26, when Musk tweeted about potentially acquiring a competing social network. That was just after he had filed his intent to purchase, by March 25, 2022, about $3 billion of Twitter’s stock. Surprisingly, the court found it reasonable to interpret this tweet as a possible red herring.
“It is more likely than not that Musk issued a material misleading representation,” – Judge Andrew L. Carter
The lawsuit further alleges that Musk actively concealed his desire and investment in Twitter. Consequently, shareholders were forced to sell their shares at steep discounts. Despite these allegations, Musk proceeded with a leveraged buyout of Twitter in 2022 for approximately $44 billion, making substantial changes to the platform and eventually rebranding it as X.
In a surprising new twist, Musk’s artificial intelligence startup, xAI, has agreed to combine with this social network in an all-stock deal. After this development, xAI is now valued at $80 billion. It values the social media company at $33 billion, further demonstrating Musk’s deep reach into technology and social media.
Author’s Opinion
Musk’s legal troubles are mounting, and this lawsuit serves as a stark reminder of the regulatory scrutiny surrounding his high-profile acquisitions. The combination of social media and AI with X and xAI may offer innovation, but Musk’s disregard for transparency and potential missteps could further fuel skepticism about his leadership in both tech and finance.
Featured image credit: Steve Jurvetson via Flickr
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