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Judge Breyer threw out the year-long Twitter shareholder lawsuit against Elon Musk, which accused him of cheating other shareholders.
San Francisco’s US District Judge Charles Breyer has dismissed the shareholder lawsuit against Elon Musk challenging the Twitter buyout. On Monday, Breyer ruled that the context in which Musk sustained the suit lacked standing. According to the district judge, plaintiff William Heresniak sued the Tesla CEO for grievances associated with his Twitter buyout, and not the buyout’s fairness. Breyer further said that Heresniak failed to prove how Musk’s delayed disclosure of a 9.2% Twitter stake impacted share prices.
Heresniak has claimed that Musk’s delayed stake disclosure allowed the billionaire businessman to procure more shares at lower prices before the buyout announcement.
Court Ruling Comes a Year after Twitter Shareholder Lawsuit
Judge Breyer’s ruling comes a year after the shareholder lawsuit, shortly after Twitter accepted his $54.20 per share offer. At the time, the plaintiff alleged that the Tesla CEO cheated Twitter shareholders multiple times last year while buying the company.
In addition to absolving Musk of wrongdoing, Judge Breyer ruled that Musk did not breach Twitter’s fiduciary trust with two friends. Breyer said there is no proof that the Tesla CEO helped then-board members Jack Dorsey and Silver Lake’s Egon Durban breach their fiduciary duties by pursuing self-serving interests. According to the judge, Dorsey rolling over his billion-dollar worth of the Twitter stock into an equity stake in Musk’s new company lessened the financial strain of the acquisition price. Furthermore, Breyer stated that neither Musk nor his business associates “improperly diverted” money from other Twitter shareholders.
As of press time, lawyers representing Musk and Twitter on the shareholder lawsuit had yet to comment on the ruling. However, in an early March filing, attorneys described Heresniak’s claims as “a disjointed laundry list” of grievances against Musk.
Since taking over Twitter last October, Musk has embarked on a scheme to raise the company’s profitability. The Tesla CEO has started monetizing several services even as the social media giant loses ad revenue. The primary reason for waning ad revenue is that advertisers worry the new ‘free speech’ approach could impact products and services. For instance, some advertisers remain concerned that their ads could be associated with hate speeches or ‘politically incorrect’ messages.
Musk Stepping Down as Twitter CEO
Less than two weeks ago, Elon Musk announced he would step down as Twitter CEO in late June. However, Musk would remain the company’s Executive Chairman and Chief Technology Officer.
Linda Yaccarino is replacing Musk as CEO. She previously served as a senior advertising executive at NBCUniversal. Yaccarino’s appointment is welcome as observers believe her guiding presence would allow Musk to focus on other obligations. The outspoken businessman has long teased relinquishing his CEO role at Twitter once he finds a suitable replacement. Last December, Musk polled his followers on whether he should stay on or quit the role. 57.5% of votes called for the Tesla CEO to step down.