On Tuesday, former Twitter shareholders sued Elon Musk for claiming he missed a recent run-up of its stock price because he waited too long to release a 9.2 percent stake in the social media company.
In a proposed class action lawsuit filed in federal court in Manhattan, shareholders said that electric car company Tesla Inc.’s chief executive made a “materially false and misleading statement and error” by failing to disclose that Mask had invested in Twitter as needed by March 24. Under federal law.
On April 4, Twitter shares rose 27 percent from $ 39.31 (about 2, 2,990) to $ 49.97 (about 8 3,800), after Musk released his shares, which investors saw as a vote of confidence for the world’s richest man based in San Francisco-based Twitter.
Former shareholders, led by Mark Russell, say the delayed release allows Musk to buy more Twitter shares at lower prices, while deceiving them into selling them at an “artificially deflated” price.
The lawsuit seeks indefinite damages and punitive damages.
One of Musk’s lawyers had no immediate comment. Tesla is not the culprit.
Under U.S. securities law, investors must disclose within 10 days of acquiring 5 percent of a company, which would have been March 24 in the case of Mask.
Twitter announced on April 5 that Musk would join its board of directors, but this week said it had decided not to.
Without joining the board, Musk, a strong Twitter user, could continue to buy shares without entering into an agreement with the company to limit his shares to 14.9 percent.
Some analysts have suggested that Mask could force Twitter to change or even follow an unsolicited bid for the company.
Russella said she sold 35 Twitter shares for $ 1,373 (about 1, 1,04,590), or an average price of $ 39.23 (about 2, 2,990), between March 25 and 29. The mask is valued at $ 265.1 billion (approximately Rs. 20,19,970 crore), according to Forbes Magazine.
The case is Russella v. Mask, U.S. District Court, Southern District of New York, No. 22-03026.
Thomson Reuters 2022