Musk recently revealed he was buying into the company but did not follow proper procedure
Elon Musk is being sued by another Twitter shareholder who claims that he failed to disclose his percentage stake in the company within the proper time required by the US Securities and Exchange Commission (SEC), according to reports.
The Tesla and SpaceX owner bought a 9.2 per cent stake – 73,486,938 shares worth approximately $3bn – in the social media giant on March 14, becoming their biggest stakeholder and sending the company’s stock value skyrocketing.
In typical Musk fashion, he essentially broke the news by posting a meme:
— Elon Musk (@elonmusk) April 7, 2022
However, under US law, investors are required to notify the SEC within 10 days of acquiring any stake above five per cent in a publicly listed company and the 50-year-old did not officially declare his purchase until April 4.
Now, a new class-action lawsuit filed in New York by the individuals who sold him their shares accuses the billionaire of using the time between his passing the aforementioned threshold and publicly revealing his stake to acquire and manipulate shares at an “artificially deflated” price.
The legal precedent they are pursuing is that, as investors, they ultimately lost out on the deal, “miss[ing] the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby”.
Twitter CEO Parag Agrawal revealed that Musk would not be joining the board of directors on Monday, stating that despite his excitement, he believes “this is for the best”.
Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk
— Parag Agrawal (@paraga) April 11, 2022
Nevertheless, Agrawal confirmed that Musk remains Twitter’s biggest shareholder and that the company “will remain open to his output”.
He is thought to have saved roughly $143m when purchasing due to delaying his declaration and had reportedly begun acquiring shares as early as January, according to reports.
Legal documents state that the “defendant had the obligation, ability, and opportunity to prevent the issuance of the false statements and omissions alleged herein,” adding that he “knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the omissions being made were false and misleading.”
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