Advert

Elon Musk Being Sued By Former Twitter Shareholders

Published 
| Last updated 

Elon Musk Being Sued By Former Twitter Shareholders

Elon Musk is being sued by former Twitter shareholders over his recent acquisition.

In a recent filing with the US Securities and Exchange Commission (SEC), it was revealed the Tesla and SpaceX chief now holds a 'passive' stake in the social media giant; more precisely, he owns 9.2 percent.

Musk was originally set to join the social media firm's board of directors, but its chief executive Parag Agrawal announced this wouldn't be the case going forward.

Advert
Elon Musk is now the world's richest man, according to Forbes. Credit: Alamy
Elon Musk is now the world's richest man, according to Forbes. Credit: Alamy

While Musk clearly has more than a few thoughts on how Twitter could evolve, specifically concerning an edit button and changes to the Twitter Blue subscription service, others have voiced concerns over how he bought his shares in the first place.

In a new proposed class action filed in Manhattan federal court, former shareholders have accused Musk of making 'materially false and misleading statements and omissions' by failing to declare his stake surpassing five percent to the SEC.

Musk reportedly reached five percent on 14 March, but only disclosed this publicly on 4 April, allowing him to keep the stock price low while buying up shares at a lower price.

Advert
Twitter's headquarters in San Francisco. Credit: Alamy
Twitter's headquarters in San Francisco. Credit: Alamy

When Musk disclosed his stake, Twitter's share price rose from $39.31 to $49.97. The shareholders allege this allowed Musk to buy up more shares at the lower price, while causing others to sell their shares at 'artificially deflated' prices.

They then 'missed the resulting share price increase as the market reacted to Musk's purchases and were damaged thereby', the suit notes.

The lawsuit, led by Marc Rasella, is seeking unspecified compensatory and punitive damages, as per Reuters. Musk and his lawyer have yet to comment on the case.

Advert

Musk's acquisition attracted criticism from other experts. David Kass, a finance professor at University of Maryland’s business school, told The Washington Post: "I really don’t know what’s going through his mind. Was he ignorant or knowledgeable that he was violating securities law?"

It's unlikely the SEC will ask Musk to hand over the profits he pocketed from the delayed disclosure, according to Adam Pritchard, a professor of securities law at University of Michigan’s law school.

He said the commission 'would have to be really angry with him to try that because they would have a good chance of a court rejecting that argument'.

Advert

On Musk's decision to not join the board of directors, Agrawal said it was 'for the best... we have and will always value input from our shareholders whether they are on our board or not. Elon is our biggest shareholder and we will remain open to his input.'

If you have a story you want to tell, send it to UNILAD via [email protected]  

Featured Image Credit: Credit: Alamy

Topics: Technology, Elon Musk, Twitter

Cameron Frew
More like this
Advert
Advert
Advert

Chosen for YouChosen for You

News

Taliban spend day on pedalos as they celebrate year of ruling Afghanistan

9 hours ago

Most Read StoriesMost Read

California will become first state to offer free school meals to every kid

10 hours ago