Twitter Investors Sue Elon Musk For 'Manipulating Stock Price' During Takeover Bid
The investors pointed out that Musk continued buying Twitter shares only to reveal later in early April that he owned 9.2 per cent of stake in the company
New Delhi: In the latest lawsuit, Twitter investors have sued Tesla chief Elon Musk claiming he manipulated the company's stock price downward in a bid to buy the social microblogging site for $44 billion. The investors have claimed that Musk saved himself $156 million by failing to disclose that he had purchased more than 5 per cent of Twitter by March 14, reported news agency Reuters.
In their legal suit, investors demanded to be certified as a class and to be awarded an unspecified amount of punitive and compensatory damages.
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In fact, the investors named Twitter as a defendant and stressed that the company had an obligation to investigate Musk's conduct. However, they are not seeking damages from the firm. The investors, who filed a lawsuit on Wednesday in San Francisco federal court, pointed out that Musk continued buying stock only to reveal later in early April that he owned 9.2 per cent of the company, according to the report.
"By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought the Twitter stock at an artificially low price," stated the group of investors, led by Virginia resident William Heresniak.
The investors said the recent drop in Tesla's stock has put Musk's ability to finance his acquisition of Twitter in "major peril" since he has pledged his shares as collateral to secure the loans he needs to buy the company.
After the news of a lawsuit filed against Musk, Tesla's shares were trading around $713 on Thursday afternoon, down from above $1,000 in early April.
US regulators are already investigating the delayed disclosure of Musk's stake in Twitter in April, the Wall Street Journal reported. It is mandatory for an investor who crosses a 5 per cent stake to file a form with the SEC within 10 days. This typically serves as an early sign to stakeholders that a big investor could seek to control the company.
Investors pointed out that the tweet on May 13 where he stated the buyout was "temporarily on hold" until Twitter proved that spambots accounted for less than 5 per cent of its users, is also directed at driving the share price down.
However, Heresniak's lawsuit does not seek to stop the takeover.
Musk on Wednesday pledged an additional $6.25 billion in equity financing to fund his bid for Twitter, a sign he is still working to complete the deal.
In a separate case, Musk was sued in Delaware Chancery Court by a Florida pension fund seeking to halt the deal on the basis that some other big Twitter shareholders were supporting the buyout, a violation of Delaware law.
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