A Twitter shareholder has filed a federal securities class action lawsuit against Tesla CEO Elon Musk, alleging that Musk failed to disclose his 5% investment in the social media platform when he was required to do so.
According to the complaint, the delay allowed Musk to buy more Twitter shares at a lower price, allowing him to defraud Twitter stock sellers of larger profits.
Marc Bain Rasella filed the action on behalf of “all investors who sold or otherwise disposed of Twitter, Inc. equities between March 24, 2022 and April 1, 2022, inclusive” in federal court in Manhattan on Tuesday.
According to the lawsuit, Musk began buying Twitter shares in January and by March 14 had bought more than 5% of the company.
Investors must submit a Schedule 13 with the Securities and Exchange Commission (SEC) within 10 days of exceeding the 5% threshold. Musk reportedly did not file the paperwork until he had amassed a 9.1% interest in Twitter.
According to the lawsuit, “when Musk finally filed the required Schedule 13, thereby revealing his ownership stake in Twitter, the Company’s shares rose from a closing price of $39.91 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022 — an increase of approximately 27 percent.”
According to the complaint, Musk was able to artificially keep the price of Twitter down and buy it at a premium by keeping his growing position in the company covert.
On April 4, Twitter announced that Musk had purchased 9.2 percent of the company’s stock. Following a series of tweets from the Tesla executive wondering if Twitter was dying, if the firm should transform its San Francisco headquarters into a homeless shelter, and whether the “w” in Twitter should be erased, Twitter CEO Parag Agrawal reversed his view earlier this week.
To read our blog on “Elon Musk turns down the Twitter board of directors: Parag Agrawal, CEO,” click here.
