The suit says Musk’s delay in notifying the SEC made Musk richer at the expense of other investors.
Elon Musk has only been Twitter’s top shareholder for a few weeks, yet he’s already the target of a class action lawsuit over his investment management. A Twitter shareholder has launched a class action lawsuit against Musk for his 11-day delay in declaring his Twitter investment to the Securities and Exchange Commission.
Musk was obligated to file papers with the Securities and Exchange Commission (SEC) by March 24th, ten days after his stake in Twitter increased to 5%, but he didn’t do so until April 4th. That delay may not appear to be significant, but it might have netted him up to $156 million. According to the lawsuit, those profits were made at the expense of other shareholders who did not benefit in the same way.
“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,” the lawsuit states.
- Elon Musk now has a 9.2 percent stake in Twitter.
- A Spotify executive who helped spearhead the company’s podcast effort is departing.
According to the shareholder who brought the suit, he and other investors sold shares at “artificially deflated” prices as a result of Musk’s actions. The suit also alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he had acquired a 5% ownership stake in Twitter as required.”
The lawsuit comes after a chaotic few days for Twitter and Musk. The Tesla CEO and noted Twitter troll had initially agreed to join Twitter’s board of directors, much to the dismay of some employees. But the decision was abruptly reversed following several days of characteristically bizarre tweets from Musk, who polled his Twitter followers whether the company should change its name, and speculated on whether the service was “dying.”
In an email to employees, Twitter CEO Parag Agrawal noted that as a board member Musk would have been a “fiduciary of the company, where he, like all board members has to act in the best interest of the company and all our shareholders.” He added that he believed it was “for the best” that Musk ultimately wouldn’t take the position.
