A proposed class-action lawsuit by a former shareholder against the then Twitter CEO Elon Musk was dismissed by a federal judge on Monday. The lawsuit claimed that Musk had deceived Twitter shareholders multiple times while acquiring the social media company for $44 billion. However, U.S. District Judge Charles Breyer in San Francisco ruled that the plaintiff, William Heresniak, lacked standing to sue because he challenged specific actions associated with Musk’s buyout, rather than the fairness of the buyout itself, reports say. A little over a month after Twitter accepted Musk’s offer to buy it out, the lawsuit was brought in May 2022, while the actual sale took place in October.
Heresniak, a shareholder during Musk’s acquisition, filed the lawsuit asserting that Musk had tried to back out of the deal due to the decline in value of his Tesla stock, which he had used as collateral for a $12.5 billion loan to purchase Twitter. The lawsuit also alleged that Musk favored friends on the fiduciary board, including Jack Dorsey, while neglecting the needs of the shareholders.
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Musk’s legal team filed a motion to dismiss, describing Heresniak’s claims as a disconnected list of grievances against Elon Musk, many of which were irrelevant. According to Judge Breyer, Heresniak failed to show that Musk’s delayed disclosure of a 9.2% ownership in Twitter caused him injury. The suit alleged that this allowed Musk to purchase additional shares at lower prices before the buyout was announced. The judge also noted that Heresniak did not show harm from the buyout’s delayed closing, which took place one and a half months later than planned.
Initially, Musk expressed his intention to withdraw from the offer, citing an excessive number of bots on the Twitter platform. In a letter from his lawyers to the company, they claimed Twitter had breached multiple provisions of the agreement, made false representations, and would experience a negative impact on the company.
Judge Breyer concluded that Heresniak’s complaint was invalid because he only challenged the “wrongs associated with the merger” at the time of Musk’s takeover, rather than questioning its fairness, according to reports.
Additionally, the judge found no evidence supporting the claim that board members Jack Dorsey and Egon Durban of Silver Lake private equity firm received special treatment from Musk or that Musk knowingly participated in any breach by collaborating with the fiduciary board.
Recently, Musk appointed Linda Yaccarino as Twitter’s CEO after she stepped down from her position as NBCUniversal’s chairman of global advertising and partnerships.
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