A lawsuit has been filed against billionaire, Elon Musk, at the Manhattan federal court by a fellow Twitter investor.
The suit was filed by Marc Bain Rasella, a Twitter investor, for and on behalf of “all investors who sold or otherwise disposed of Twitter Inc. securities between March 24, 2022, and April 1, 2022, inclusive.”
The federal securities class action lawsuit was filed by the investor on the grounds that Musk failed to disclose his 5% stake in the social media company when he was required to do so.
Federal trade laws dictate that investors must inform the Securities and Exchange Commission within 10 days when they take a more than 5% stake in a company.
Musk, who started buying Twitter stock in January, allegedly hit this milestone on March 14, meaning he should have informed the SEC by March 24. The Tesla CEO revealed on 4 April that he had acquired a 9.2% stake in Twitter. Shares of the social media company soared, as investors viewed the move as a vote of confidence from the richest man in the world.Some Twitter investors say they lost out on potential gains as a result of this delay.
In the time between passing the 5% threshold and publicly reporting, Musk was able to buy up additional shares at a deflated price, the new lawsuit alleges. Experts estimate that delay may have illegally netted Musk $156m.
After Musk disclosed his stake, Twitter shares rose 27% – from $39.31 to $49.97. The plaintiff in the suit sold 35 Twitter shares for $1,373, or an average price of $39.23, before Musk revealed his investments.
Jeffrey Block, of the law firm representing the plaintiff, confirmed the suit had been filed as of Tuesday. The lawsuit seeks a jury trial for unspecified compensatory and punitive damages. Musk did not immediately respond to a request for comment.
The SEC did not immediately respond to a request for comment regarding whether it would also take action against Musk.
Musk’s announcement that he had acquired a 9.2% stake – making him the company’s largest shareholder at the time – caused immediate controversy. Many speculated the acquisition could allow Musk, a vocal critic of Twitter, to push the company to make broader changes.
Twitter announced on 5 April that Musk would join its board of directors, but on Sunday, Twitter’s CEO, Parag Agrawal, announced abruptly that Musk would not be joining the board after all.
By not joining the board, Musk, a prolific Twitter user, can keep buying shares without being bound by his agreement.
According to the suit, the delay allowed Musk to buy more shares of Twitter at a lower price and cheat sellers of Twitter stock out of increased profits. The plaintiff maintained that by keeping his growing stake in Twitter quiet, Musk was able to artificially keep the price of the stock down and buy it at a premium.
The billionaire announced on his Twitter account on the 4th of April that he had acquired 9.2% of the shares of Twitter, and that there was talk of him joining the board which didn’t happen for no stated reason amid speculations. The speculations include reports that the billionaire declined to join the board so as not to jeopardize his freedom of speech, not having a background check done on him or being told what to tweet and what not to tweet.
It is also speculated that a series of controversial tweets by Musk over the past weekend also caused Twitter CEO to become skeptical about Musk’s ascension to the board of the company.
The suit was filed by Marc Bain Rasella, a Twitter investor, for and on behalf of “all investors who sold or otherwise disposed of Twitter Inc. securities between March 24, 2022, and April 1, 2022, inclusive.”
The federal securities class action lawsuit was filed by the investor on the grounds that Musk failed to disclose his 5% stake in the social media company when he was required to do so.
Federal trade laws dictate that investors must inform the Securities and Exchange Commission within 10 days when they take a more than 5% stake in a company.
Musk, who started buying Twitter stock in January, allegedly hit this milestone on March 14, meaning he should have informed the SEC by March 24. The Tesla CEO revealed on 4 April that he had acquired a 9.2% stake in Twitter. Shares of the social media company soared, as investors viewed the move as a vote of confidence from the richest man in the world.Some Twitter investors say they lost out on potential gains as a result of this delay.
In the time between passing the 5% threshold and publicly reporting, Musk was able to buy up additional shares at a deflated price, the new lawsuit alleges. Experts estimate that delay may have illegally netted Musk $156m.
After Musk disclosed his stake, Twitter shares rose 27% – from $39.31 to $49.97. The plaintiff in the suit sold 35 Twitter shares for $1,373, or an average price of $39.23, before Musk revealed his investments.
Jeffrey Block, of the law firm representing the plaintiff, confirmed the suit had been filed as of Tuesday. The lawsuit seeks a jury trial for unspecified compensatory and punitive damages. Musk did not immediately respond to a request for comment.
The SEC did not immediately respond to a request for comment regarding whether it would also take action against Musk.
Musk’s announcement that he had acquired a 9.2% stake – making him the company’s largest shareholder at the time – caused immediate controversy. Many speculated the acquisition could allow Musk, a vocal critic of Twitter, to push the company to make broader changes.
Twitter announced on 5 April that Musk would join its board of directors, but on Sunday, Twitter’s CEO, Parag Agrawal, announced abruptly that Musk would not be joining the board after all.
By not joining the board, Musk, a prolific Twitter user, can keep buying shares without being bound by his agreement.
According to the suit, the delay allowed Musk to buy more shares of Twitter at a lower price and cheat sellers of Twitter stock out of increased profits. The plaintiff maintained that by keeping his growing stake in Twitter quiet, Musk was able to artificially keep the price of the stock down and buy it at a premium.
The billionaire announced on his Twitter account on the 4th of April that he had acquired 9.2% of the shares of Twitter, and that there was talk of him joining the board which didn’t happen for no stated reason amid speculations. The speculations include reports that the billionaire declined to join the board so as not to jeopardize his freedom of speech, not having a background check done on him or being told what to tweet and what not to tweet.
It is also speculated that a series of controversial tweets by Musk over the past weekend also caused Twitter CEO to become skeptical about Musk’s ascension to the board of the company.