Tesla and SpaceX CEO Elon Musk’s tumultuous Twitter investment took a new twist Tuesday and is now facing a class-action lawsuit from Twitter shareholders who claim he intentionally delayed disclosing his stake in the company in the time period prescribed by law.
According to the lawsuit filed in Manhattan federal court by the plaintiff and stockholder Marc Bain Rasella, Musk has violated the regulatory deadline he could buy more shares at lower prices, preventing them in the process from profiting from the rise in stock prices.
As the lawsuit alleges, Musk was required to file with the Securities and Exchange Commission within 10 days after passing the 5% ownership threshold, but he failed to do so until April 4, when his announcement pushed Twitter shares up 27% from April 1.
Musk apparently did not submit the filing until he had amassed 9.1% stake in Twitter, becoming the social media company’s largest shareholder.
He is now sued by Twitter shareholders who sold or otherwise disposed of Twitter securities between March 24 and April 1, arguing that Musk was able to artificially keep the price of the stock down and buy it at a premium by keeping his growing stake in Twitter quiet.
The lawsuit alleges that his strategy hurt less wealthy investors who sold shares in the nearly two weeks before Musk acknowledged holding a major stake, so Rasella is now seeking financial relief in the lawsuit that will be determined at trial.
Musk was reportedly offered but has denied a position on the board though he has been quite vocal Musk was reportedly offered but has denied a position on the board though he has been quite vocal about changes on the social media platform, including adding an edit feature and verifications for Twitter Blue.
Meanwhile, by not joining the board, Musk can also keep buying Twitter shares without being bound by his agreement to limit his stake to 14.9%.
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