A U.S. judge has allowed a lawsuit against Elon Musk to proceed as a class action, which significantly raises the potential legal risk for the billionaire. The case centers on Musk’s early investment in Twitter, now known as X, where investors claim that he waited too long to disclose his stake. Because the lawsuit is now certified as a class action, a large group of investors can sue together instead of individually. As a result, this could lead to much larger damages if Musk is ultimately found liable.
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Trade TSLA with leverageInvestors say he missed a key SEC deadline to disclose that he had acquired a 5% stake in Twitter, and instead waited 11 more days before revealing a much larger 9.2% position. During that period, they argue, the stock traded at lower prices, allowing Musk to save over $200 million while other investors sold shares at a disadvantage. In addition, they point to tweets where Musk suggested creating a rival platform instead of buying Twitter, which they say may have influenced the market’s perception. Meanwhile, Musk argued that investors cannot prove they relied on his actions, but the judge rejected that defense.
The court said there is enough basis to assume that Musk’s silence and statements affected the stock price and that investors relied on that information. The judge also noted that challenges in calculating damages do not prevent the case from moving forward as a class action. This lawsuit is separate from another case in California, where a jury already found Musk liable for comments made during the Twitter acquisition process, although damages have not yet been decided, and an appeal is expected. Additionally, the SEC has also sued Musk over the same disclosure issue.
What Is the Prediction for TSLA Stock?
When it comes to Elon Musk’s companies, most of them are privately held. However, retail investors can invest in his most popular company, Tesla (TSLA). Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 13 Buys, 11 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSLA price target of $395.31 per share implies 6.3% upside potential.
