A shareholder helped put together a class-action lawsuit against Tesla CEO Elon Musk. The lawsuit alleged that Musk's decision to purchase Twitter negatively impacted shareholders on a number of occasions throughout 2022.
As you may know, it was quite some time ago when Tesla's Elon Musk started hinting that he may buy Twitter. Eventually, he ran a poll and promised to abide by the results. Once it came time to buy Twitter, financial markets were in a frenzy, and the dollar amount Musk agreed on was clearly too high.
The situation wore on and on, and some believe it distracted Musk from his obligations at Tesla. It also resulted in all sorts of negative media coverage. This is because Musk was going to buy Twitter, then he was going to back out, then there were lawsuits, and on and on. Share prices for both Tesla and Twitter were volatile during much of this time as well.
Eventually, the Tesla CEO did, in fact, purchase Twitter, for what many will tell you was way too much money. During the time leading up to and after the purchase, some saw the CEO as absent from Tesla, and many were unhappy with his change of tone on social media.
Some Tesla investors made it clear publically that they believed Musk was the reason Tesla's stock price was dropping. Twitter investors were also troubled by Musk's antics. Plaintiff William Heresniak moved forward with suing the CEO in May 2022, right after Twitter agreed to Musk's $54.20 per share buyout terms.
Musk and his lawyers have been working to get the lawsuit dismissed, and they finally got their wishes. According to an article by Teslarati, the court shared that the Plaintiff's claims were “a disjointed laundry list of — often irrelevant — grievances against Elon Musk.”
US District Judge Charles Breyer ruled that Heresniak didn't actually have standing to sue Musk since his lawsuit wasn't an effort to challenge whether or not the buyout was fair. Rather, the Plaintiff hoped to expose what he called the “wrongs associated with” the transaction.
The class-action lawsuit essentially focused on the fact that Musk didn't disclose his earlier stake in Twitter by the required time, which was at 9.2%. The case against the CEO aimed to prove that he was able to buy more shares at a lower price than would have been the case if he'd been honest about his investment.
The case also aimed to prove that Musk helped Twitter board members Jack Dorsey and Egon Durban and their friends "breach fiduciary duties." However, there wasn't enough evidence of such. Judge Breyer explained that Dorsey did not unjustly divert money from shareholders, and there was no provable wrongdoing by either Dorsey or Musk amid the buyout process.
