Elon Musk has only been Twitter’s largest shareholder for a few weeks, but he’s already facing a class action lawsuit over his handling of the investment. A Twitter shareholder has filed a class-action lawsuit against Musk over his 11-day delay in officially disclosing his investment in Twitter to the SEC.
Under the securities law, Musk was required to file with the SEC by March 24 — 10 days after his stake in Twitter rose to 5 percent — but he didn’t do so until April 4. That delay might not sound particularly significant, but it may have netted him as much as $156 million. According to the lawsuit, those gains came at the expense of other shareholders who were unable to benefit in a similar way.
“Investors who sold shares of Twitter stock between March 24, 2022, when Musk was required to disclose his Twitter ownership, and prior to the actual disclosure on April 4, 2022, missed the resulting share price gain as the market reacted to Musk’s purchases and was damaged as a result,” the lawsuit states.
According to the shareholder who filed the lawsuit, Musk’s actions caused him and other investors to sell shares at “artificially deflated” prices. The lawsuit also alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he acquired a 5% stake in Twitter as required.”
The lawsuit comes after a chaotic few days for Twitter and Musk. The Tesla CEO and well-known Twitter troll originally agreed to join Twitter’s board of directors, much to the dismay of some employees. But the decision was abruptly reversed after several days of Musk sending typically bizarre tweets questioning his Twitter followers about whether the company should change its name and speculating if the service was “dying.”
In an email to employees, Twitter CEO Parag Agrawal noted that as a board member, Musk would have been a “company fiduciary where he, like all board members, must act in the best interests of the company and all of our shareholders.” He added that he believes it’s “for the best” that Musk ultimately doesn’t take on the position.
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