Elon Musk’s SEC Lawsuit Over Twitter Shareholding Dismissal Bid Fails
A U.S. court has rejected Tesla and SpaceX CEO Elon Musk’s attempt to dismiss a lawsuit brought by the U.S. Securities and Exchange Commission (SEC) regarding his handling of shareholding disclosures during the acquisition of Twitter, now known as X.
The federal court in Washington D.C. ruled on Thursday, January 3rd, that it would not accept the SEC’s motion to dismiss the case, which centers on Musk’s claim that complying with disclosure requirements would infringe upon his freedom of expression.
Judge Sparkle Sooknanan, in her ruling, acknowledged Musk’s concerns about the potential impact of disclosure on stock prices. However, she firmly stated, “I understand that Musk does not want to disclose information because disclosure may affect the stock price, but the disclosure obligation under Article 13(d) of the Securities Exchange Act does not infringe freedom of expression.” The judge further clarified that Musk’s argument did not provide a sufficient legal basis to halt the proceedings.
The SEC initially filed the lawsuit in January of last year, alleging that Musk caused investor harm by delaying the reporting of his stake in Twitter during the period he was acquiring the social media platform in 2022. The agency contends that this delayed announcement allowed Musk to purchase shares at a lower price, resulting in losses exceeding $150 million – approximately 200 billion Korean won – for other shareholders.
This legal challenge is just one of several ongoing disputes surrounding X. Recent reports indicate that French judicial authorities raided X’s Paris office, investigating potential algorithm manipulation and unlawful data extraction. Furthermore, the European Union (EU) has initiated separate actions against the platform.
The outcome of this SEC lawsuit could have significant implications for future disclosure requirements and the balance between free speech and financial transparency for high-profile executives. The case is expected to proceed, with further developments anticipated in the coming months.
