Elon Musk is being sued by Twitter shareholders for stock price manipulation

(Credit: Ryan Lash/TED)

Tesla CEO Elon Musk is being sued by Twitter shareholders for stock price manipulation, a complaint said as his $44 billion bid to take over the social media platform moves forward. Twitter is also named as a defendant in the complaint, but the plaintiffs are not seeking damages from the social media company.

Musk is being accused of saving himself $156 million by failing to disclose he had purchased at least 5 percent of Twitter by March 15. Regulatory standards require any person purchasing 5 percent of a public company to disclose their ownership stake within ten days, but Musk failed to do this. The group of investors is asking to be certified as a class, and they would like to be awarded an unspecified amount that would resolve punitive and compensatory damages, a report from Reuters states.

The lawsuit also lists Twitter as a defendant in the case as the company is argued to have had an obligation to investigate Musk’s conduct, especially if it affected the Twitter stock price. They are not being sought out for damages, however.

Musk continued to buy Twitter stock after manipulating the price and driving it downward, the shareholders claim in the lawsuit. Musk delayed his disclosure according to a statement, which would have publicly revealed he owned 9.1 percent of the company.

“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” William Heresniak, the leader of the investors, said.

Investors also listed Musk’s claim that the Twitter acquisition deal was “on hold” due to his opinion that less than 5 percent of total accounts were “bots” in the lawsuit. This announcement also sent Twitter shares downward.

Musk has over $33 billion in equity financing after adding an additional $6.25 billion on Wednesday. The move eliminated Musk’s need to utilize margin loans for the deal, which put pressure on Tesla stock. The lack of margin loans in Musk’s purchasing plan for Twitter sent Tesla shares up nearly 8 percent on Thursday.

Disclosure: Joey Klender is a TSLA Shareholder. He is not a TWTR Shareholder.

I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

Joey Klender: Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his time at TESLARATI, Joey has broken several big stories, including the first images of the Tesla Model S Plaid, the imminent release of the 4680 Model Y through EPA certification, and several expansions to the Lucid AMP-1 factory in Arizona, to name a few. His stories have been featured in several publications, including Yahoo! Finance, Fox News, CNET, and Seeking Alpha. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on Twitter @KlenderJoey.
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