A Twitter investor is suing Tesla CEO Elon Musk in a federal securities class action lawsuit because Musk failed to announce his 5% stake in the social media company when he was required to do so. The delay permitted Musk to acquire more Twitter shares at a lower price and cheat sellers of Twitter stock out of increased profits, claims the plaintiff. The lawsuit was registered in Manhattan federal court on Tuesday by Marc Bain Rasella, a Twitter Investor, on behalf of “all investors who sold or otherwise disposed of Twitter, Inc. securities between March 24, 2022, and April 1, 2022, inclusive.”
Elon Musk Did Not Publicly Announce His Rising Twitter Shares
According to the lawsuit over Twitter shares, Musk started purchasing Twitter shares in January and by March 14 had acquired over 5% ownership in Twitter. The Securities and Exchange Commission (SEC) mandates investors to file a Schedule 13 within 10 days of passing the 5% threshold. Musk apparently did not submit the filing until he had amassed a 9.1% stake in Twitter shares.
Musk Artificially Controlled the Price of Stock, Claims Twitter Investor
“When Musk finally filed the required Schedule 13, thereby revealing his ownership stake in Twitter, the Company’s shares rose from a closing price of $39.91 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022 — an increase of approximately 27%,” reads the lawsuit filed by the Twitter investor. By keeping his growing stake in Twitter shares quiet, Musk was able to artificially keep the price of the stock down and acquire it at a premium, says the plaintiff.
In addition to this, on April 4, Twitter confirmed Musk had acquired 9.2% of Twitter shares. There was 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 corporation should convert its San Francisco headquarters into a homeless shelter and whether the “w” in Twitter should be deleted.