NEW YORK (Reuters) – The former Twitter company sued Elon Musk on Tuesday (TWTR.N) Shareholders who claim they missed the recent increase in its share price because it waited so long to reveal a 9.2% stake in the social media company.
In a proposed class action filed in Manhattan federal court, shareholders said Musk, CEO of electric car company Tesla Inc. (TSLA.O)made “materially false and misleading statements and omissions” by not disclosing that he had invested in Twitter by March 24 as required by federal law.
Twitter shares surged 27% on April 4, to $49.97 from $39.31, after Musk disclosed his stake, which investors saw as a vote of confidence from the world’s richest person at Twitter in San Francisco.
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Former shareholders led by Mark Russella said the late disclosure allowed Musk to buy more Twitter shares at lower prices, while defrauding them into selling at “artificially reduced” prices.
The lawsuit seeks unspecified compensatory and punitive damages.
Musk’s lawyer had no immediate comment. Tesla is not a defendant.
Elon Musk attends the opening ceremony of Tesla’s new Giga plant for electric vehicles in Gruenheide, Germany, March 22, 2022. Patrick Bloll/Paul via Reuters
US securities law requires investors to disclose within 10 days when they acquire 5% of the company, which was in the case of Musk on March 24. Read more
Twitter announced on April 5 that Musk would be joining its board of directors, but said this week that he had decided not to join. Read more
By not joining the board of directors, Musk, a prolific Twitter user, can continue to buy shares without sticking to his agreement with the company to limit his stake to 14.9%.
Some analysts have suggested that Musk might push Twitter to make changes, or even pursue an unsolicited offering to the company.
Rasella said he sold 35 shares on Twitter for $1,373, or an average price of $39.23, between March 25 and 29. Musk is worth $265.1 billion, according to Forbes magazine.
The case is Rasella v Musk, US District Court, Southern District of New York, No. 22-03026.
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(Jonathan Stemple reports) in New York. Editing by Richard Boleyn
Our criteria: Thomson Reuters Trust Principles.
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