Why Twitter Investor Sues Elon Musk
TECHDIGEST – 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.”
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.
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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%.”
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.
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.
