A lawsuit has been filed against billionaire, Elon Musk, at the Manhattan federal court by a fellow Twitter investor.
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.
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.”
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The fact of the suit states that Elon Musk began acquiring Twitter shares in January and by March 14 had acquired over 5% ownership in Twitter. The Securities and Exchange Commission (SEC) requires investors to file a Schedule 13 within 10 days of passing the 5% threshold. Musk apparently did not submit the filing until he had amassed 9.1% stake in Twitter.
An excerpt from the suit stated “When Musk finally filed the required Schedule 13, thereby revealing his ownership stake in Twitter, the Company’s shares rose from a closing price of $39.91 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022 — an increase of approximately 27%.”
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Why is a delay in disclosure of stake an issue?
- 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.
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What you should know
- Avid Nairametrics readers would recall that 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.
