A Twitter shareholder is suing Tesla CEO Elon Musk in a federal securities class action lawsuit because Musk failed to disclose his 5% stake in the social media company when he was required to do so. The delay allowed Musk to buy more Twitter shares at a lower price and trick sellers of Twitter shares out of increased profits, the plaintiff claims.
The lawsuit was filed Tuesday in Manhattan federal court by Marc Bain Rasella on behalf of “all investors who sold or otherwise disposed of securities of Twitter, Inc. between March 24, 2022 and April 1, 2022 inclusive.”
According to the lawsuit, Musk began acquiring Twitter stock in January and by March 14 had acquired more than a 5% stake in Twitter. The Securities and Exchange Commission (SEC) requires investors to file a Schedule 13 within 10 days of exceeding the 5% threshold. Musk apparently didn’t submit the filing until he amassed a 9.1% stake in Twitter.
“When Musk finally filed the required Schedule 13, revealing his stake in Twitter, the company’s shares went from a closing price of $39.91 per share on April 1, 2022 to $49.97 per share. on April 4, 2022 – an increase of approximately 27%,” reads the lawsuit.
By keeping his growing stake in Twitter quiet, Musk was able to artificially keep the stock price low and buy it at a premium, the plaintiff says.
On April 4, Twitter confirmed that Musk had purchased 9.2% of the company’s stock. There has been talk of Musk joining Twitter’s board, but Twitter CEO Parag Agrawal reversed that stance earlier this week following a series of tweets from the Tesla executive. wondering if Twitter was dying, if the company should convert its San Francisco headquarters into a homeless shelter, and if the “w” in Twitter should be removed.