The most controversial billionaire Elon Musk has been sued by Twitter Inc shareholders, who claim he manipulated the company’s stock price downward, as the CEO of electric carmaker Tesla Inc mounts a $44 billion buyout offer for the social media platform.
According to the investors, Musk saved $156 million by failing to disclose that he had acquired more than 5 per cent of Twitter by March 14. They requested class certification and an unknown amount of punitive and compensatory damages.
They also named Twitter as a defendant, claiming the company owed them an investigation into Musk’s behaviour, though they are not seeking monetary damages from the company.
As per the lawsuit, filed on Wednesday in San Francisco federal court, the investors claimed Musk continued to buy stock after that and eventually disclosed in early April that he owned 9.2 per cent of the company.
“By delaying his disclosure of his Twitter stake, Musk engaged in market manipulation and purchased Twitter stock at an artificially low price,” the investors, led by Virginia resident William Heresniak, claimed. Requests for comment were not immediately returned by Musk or his lawyer.
The recent drop in Tesla’s stock has put Musk’s ability to finance his acquisition of Twitter in “major jeopardy,” according to the investors, because he has pledged his shares as collateral to secure the loans he needs to buy the company.
Tesla’s stock was trading around $713 per share on Thursday afternoon, down from over $1,000 in early April. According to the Wall Street Journal, the timing of Musk’s disclosure of his stake has already triggered an investigation by the US Securities and Exchange Commission (SEC).
The SEC demands any investor who purchases more than 5% of a company’s stock to disclose their assets within 10 days of crossing the limit.
The investors also claimed that Musk’s public criticism of the company, such as a May 13 tweet stating that the buyout was “temporarily on hold” until Twitter proved that spam bots accounted for less than 5% of its users, amounted to an attempt to drive the share price even lower.
Musk pledged an additional $6.25 billion in equity financing to fund his bid for Twitter on Wednesday, indicating that he is still working to close the deal.
Earlier this month, the tech mogul was sued in Delaware Chancery Court by a Florida pension fund, which sought to halt the transaction on the grounds that some other large Twitter shareholders were supporting the buyout, which is a violation of Delaware law. The lawsuit filed by Heresniak does not seek to halt the takeover.
