On Tuesday, April 12, Tesla CEO Elon Musk was sued by former shareholders of Twitter Inc. The shareholders claimed that they missed out on the recent run-up in the company’s stock price. This was apparently due to Musk waiting too long to reveal his latest 9.2% stake in Twitter Inc last month.
The proposed class action was filed in Manhattan Court this week. In it, the shareholders stated that Musk made “materially’ untrue and deceptive comments and omissions. The Chief Executive of Tesla Inc did so by failing to disclose that he had invested in the social media company by March 24, as stated by federal law as a requirement. The US securities law requires investors like Musk to reveal within 10 days when they have acquired 5% of any company. In Musk’s case, the deadline for the required disclosure would have been Thursday, March 24.
Musk made “materially false and misleading statements and omissions” – The former shareholders of Twitter.
On April 4,Twitter shares rose 27% from $39.31 to $49.97 post Musk disclosing his stake in the company. Clearly, concerned investors saw this is as a vote of confidence from Musk, who is the richest in the world, in Twitter. Marc Rasella is leading the former shareholders of the San Francisco based Twitter. They stated that the delayed revelation enabled Musk to purchase more shares of Twitter at lesser price. This, they claimed, was while he was defrauding them into selling at prices that were “artificially deflated.” The filed lawsuit currently seeks unspecified compensatory and punitive damage. Musk’s lawyer did not respond to requests for an immediate comment on the situation. Among other details, it is clear that Tesla is not a defendant.
Previously, on April 5, Twitter made an announcement stating that Musk would become a part of their board of directors. However, Twitter CEO Parag Agrawal clarified later this week that Musk decided not to join the board. Moreover, this led to the cancelation of the scheduled AMA meeting set between Musk and employees of the company. Speculations show how not joining the board works in the advantage of Musk himself and his controversial use of the platform. Moreover, he now has the liberty to keep buying shares without being tied to the company’s agreement to limit his stake at 14.9%.
Certain analysts speculate that the billionaire CEO could inspire Twitter to make certain alterations, or even go for an unsolicited bid for the company. Clearly, it sounds like a definite possibility owing to the number of changes he has already suggested. These include turning Twitter HQ into a homeless shelter and changes to Twitter Blue subscription.