New Delhi: A lawsuit has been filed in the New York federal court in which the complainant has alleged that Elon Musk, who recently made a huge investment in Twitter, disclosed his stake in the company late to buy more shares at lower prices.
The complaint accuses the billionaire of violating a regulatory deadline to reveal accumulation of a stake of at least 5 per cent, news agency AP reported. According to the lawsuit, Musk waited until he had almost doubled his stake to more than 9 per cent before he disclosed his position in Twitter. The strategy, the complaint says, hurt investors who were less wealthy and who sold their Twitter shares in the nearly two weeks before Musk acknowledged his stake.
Musk bought a little more than 6.2 lakh shares at $36.83 apiece on January 31, and went on to accumulate more through April 1, his regulatory filings show, according to the AP report. As of Monday, the CEO of electric car maker Tesla held 73.1 million Twitter shares, representing a 9.1% stake in the company.
How Musk ‘Violated Law’ By Delaying His Twitter Stake Disclosure
According to the lawsuit, filed on behalf of investor Marc Bain Rasella, Musk’s stake in Twitter had reached a 5 per cent threshold by March 14 and that required him to publicly disclose his holdings by March 24, under the US securities law. Musk, however, made the disclosure only on April 4.
Twitter’s stock soared 27 per cent on April 1 to nearly $50 by the end of April 4 trading after Musk’s revelation. The lawsuit said this deprived investors who sold shares before Musk’s disclosure the chance to realise significant gains, even as Musk continued to buy shares at the rate of $37.69 to $40.96.
According to the AP report, the lawsuit is seeking to be certified as a class action that is representing Twitter shareholders who sold shares between March 24 and April 4. This could take at least a year, or even more, the report said.
Jacob Walker, one of the lawyers who filed the lawsuit, told AP that he hadn’t approached the Securities and Exchange Commission about the alleged violations by Musk about his Twitter stake disclosure. “I assume the SEC is well aware of what he did.”
The report said Musk and his New York lawyer Alex Spiro didn’t respond to AP’s request for a comment.
Musk, whose estimated wealth is $265 billion, is said to have spent about $2.6 billion on Twitter stock. He may increase his stake further, he said in a regulatory filing Monday, the report said.
He has, meanwhile, backed out of an agreement to join Twitter’s board of directors.