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Elon Musk faces class-action lawsuit over delay in disclosing Twitter investment...

 3 years ago
source link: https://www.techspot.com/news/94175-elon-musk-faces-class-action-lawsuit-over-delay.html
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Elon Musk faces class-action lawsuit over delay in disclosing Twitter investment

The suit claims Musk made "materially false and misleading statements and omissions"

By Rob Thubron Today 5:18 AM

What just happened? There's been a lot of controversy surrounding Elon Musk suddenly becoming Twitter's largest shareholder, so this shouldn't come as too much of a surprise. The Tesla boss is facing a class-action lawsuit launched by another shareholder for failing to disclose his stake in the company within the required ten days, thereby affecting its share prices.

A 13G filing earlier this month revealed that on March 14, Musk purchased 73,486,938 Twitter shares, worth about $2.89 billion, giving him a majority 9.2% passive stake in the company. The acquisition was made public on April 4, but federal trade laws require investors who surpass a 5% stake in a company to notify the Securities and Exchange Commission (SEC) within ten days.

By delaying the announcement, Musk was able to buy more Twitter shares at an artificially low price, a move that is estimated to have netted him $156 million.

A proposed class action filed in Manhattan federal court states that "Investors who sold shares of Twitter stock between March 24, 2022, when Musk was required to have disclosed his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk's purchases and were damaged thereby."

Most of these "top" accounts tweet rarely and post very little content.

Is Twitter dying? https://t.co/lj9rRXfDHE

— Elon Musk (@elonmusk) April 9, 2022

The suit claims that investors sold shares at "artificially deflated" prices due to Musk's delay—shares jumped 27% to $49.97 when his investment was revealed on April 4. It also states that Musk made "materially false and misleading statements and omissions" by failing to disclose his 5% ownership in time. The suit's plaintiff sold 35 Twitter shares for $1,373, or an average price of $39.23, before Musk revealed his ownership.

Since becoming Twitter's biggest shareholder, Musk has asked followers if Twitter should have an edit button, which it is now getting (though not because of his poll), and whether Twitter HQ should be turned into a homeless shelter. He was set to take a seat on the board of directors but turned it down at the last minute, leaving him free to launch a potential hostile takeover.


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