NEW YORK, April 12 – Elon Musk was sued on Tuesday by former shareholders of Twitter Inc (TWTR.N) who claim they missed the recent stock price surge because he waited too long to 2% to disclose. Participation in the social media company.
In a proposed class action lawsuit filed in federal court in Manhattan, shareholders said Musk, the CEO of electric car company Tesla Inc (TSLA.O), made “materially false and misleading statements and omissions” by failing to disclose that he invested in Twitter until March 24, as required by federal law.
Twitter shares rose 27% from $39.31 to $49.97 on April 4 after Musk announced his stake in what investors saw as a vote of confidence in San Francisco-based Twitter from the world’s richest person.
Former shareholders, led by Marc Rasella, said the delayed disclosure has allowed Musk to buy more Twitter stock at lower prices while enticing them to sell at “artificially deflated” prices.
The lawsuit seeks unspecified and punitive damages.
A lawyer for Musk initially had no comment. Tesla is not a defendant.
Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS
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US securities laws require investors to disclose within 10 days if they’ve acquired 5% of a company, which would have been March 24 in Musk’s case. Continue reading
Twitter announced on April 5 that Musk would join its board of directors, but said this week he had decided against it. Continue reading
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%.
Some analysts have suggested that Musk could push Twitter for changes or even submit an unsolicited offer for the company.
Rasella said he sold 35 Twitter shares between March 25 and March 29 for $1,373, or an average price of $39.23. According to Forbes magazine, Musk is worth $265.1 billion.
The case is Rasella v. Musk, U.S. District Court, Southern District of New York, No. 22-03026.
Reporting by Jonathan Stamp in New York; Adaptation by Richard Pullin