Investors in Twitter Inc sued billionaire Elon Musk, alleging that he manipulated the company’s stock price downward, as the CEO of electric carmaker Tesla Inc prepares a $44 billion acquisition proposal for the social media platform.
Musk allegedly saved $156 million by failing to declare that he had purchased more than 5% of Twitter by March 14th, according to the investors. The requested class certification and an undetermined amount of punitive and compensatory damages.
They also listed Twitter as a defendant, claiming that the business owed Musk an investigation, though they are not seeking damages from the company.
According to the lawsuit, filed on Wednesday in federal court in San Francisco, Musk continued to buy the stock after that and eventually announced in early April that he held 9.2 percent of the firm.
“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought the Twitter stock at an artificially low price,” said the investors, led by Virginia resident William Heresniak.
Musk and his lawyer did not respond to queries for comment right away. Twitter did not respond to requests for comment.
Musk’s ability to finance his acquisition of Twitter is in “serious jeopardy,” according to the investors because he has pledged his shares as security to acquire the loans he needs to buy the firm.
On Thursday afternoon, Tesla’s stock was trading at roughly $713, down from over $1,000 in early April.
According to the Wall Street Journal, the timing of Musk’s ownership announcement has already prompted an investigation by the US Securities and Exchange Commission (SEC).
The Securities and Exchange Commission (SEC) requires any investor who buys more than 5% of a company’s stock to report their holdings within 10 days of passing the threshold.
The investors also claimed that Musk’s public criticism of the company, such as a tweet on May 13 declaring that the buyout was “temporarily on hold” until Twitter showed that spam bots accounted for fewer than 5% of its users, was an attempt to drive the stock price further lower.
Musk offered an additional $6.25 billion in equity funding to fund his bid for Twitter on Wednesday, indicating that he is still working on the deal.
To read our blog on “Investors vote against re-electing Elon Musk’s loyalist to Twitter’s board,” click here.
