A Twitter shareholder is suing Elon Musk for failing to disclose that he acquired a significant stake in the company, affecting share prices.
The Tesla CEO announced on April 4 that he had acquired a 9.2% stake in Twitter. Shares of the social media company soared as investors took the move as a vote of confidence from the world’s richest man.
However, federal trading laws require investors to notify the Securities and Exchange Commission (SEC) within 10 days after exceeding a 5% interest in a company. Musk acquired his shares on March 14, but didn’t make it public until April 4.
In the time between crossing the 5 percent threshold and public reporting, Musk was able to purchase additional shares at a deflated price, the new lawsuit alleges. Experts estimate that the delay may have illegally netted Musk $156 million.
The lawsuit, filed Tuesday in a New York federal court, seeks class-action status on behalf of investors who, during that time, would have sold Twitter stock and lost profits they would have made had Musk disclosed his stake earlier.
After Musk announced his stake, Twitter shares jumped 27% from $39.31 to $49.97. The plaintiff in the lawsuit sold 35 Twitter shares for $1,373, or an average price of $39.23, before Musk disclosed his investments.
Jeffrey Block of the law firm representing the plaintiff confirmed the lawsuit was filed on Tuesday. The lawsuit will seek a jury trial for unspecified and punitive damages. Musk did not immediately respond to a request for comment.
The SEC did not immediately respond to a request for comment on whether it would also take action against Musk.
Musk’s announcement of acquiring a 9.2% stake — making him the company’s largest shareholder at the time — immediately caused controversy. Many speculated that the acquisition could allow Musk, a vocal critic of Twitter, to push the company for broader changes.
Twitter announced on April 5 that Musk would be joining its board of directors, but on Sunday, Twitter’s CEO, Parag Agrawal, abruptly announced that Musk would not be joining the board after all.
By not joining the board, Musk, a prolific Twitter user, can continue to buy shares without being bound by his agreement with the company to cap his stake at 14.9%. After news of the U-turn broke, Musk tweeted, then deleted a hand-over-mouth emoji.
Reuters contributed to this report