Elon Musk looks to be in hot water over his recent purchase of Twitter stock.
A lawsuit brought by fellow Twitter investor accuses the billionaire entrepreneur of costing shareholders money while Musk himself saved around $143 million.
Filed by Marc Bain Rasella in a New York federal court on Tuesday, April 12, the lawsuit highlights Musk’s apparent failure to report his March 14 share purchase to the Securities and Exchange Commission (SEC) within the 10 days stipulated by law when a stake exceeds 5%.
Specifically, the suit alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he had acquired a 5% ownership stake in Twitter as required.”
It says that this meant anyone who sold shares between March 24 (the date by which Musk should have declared the purchase) and April 4 (the date when details of the purchase were made public) lost out on gains as Twitter’s share value jumped by 27% when the purchase became known.
The lawsuit also claims that the boss of Tesla and SpaceX gained in the region of $143 million during the same 11-day period when he purchased further Twitter stock at a depressed price, a move that saw him become the company’s largest single shareholder with a 9.2% stake.
Rasella’s lawsuit seeks class action status on behalf of Twitter investors who sold stock during the crucial 11-day period, and who consequently missing out on gains they would have benefited from had Musk disclosed his investment within the required time frame. The action is calling for a jury trial for compensatory and punitive damages of unspecified amounts.
Musk, a long-time critic of Twitter who also happens to have more than 80 million followers on the platform, caused a stir with his surprise investment in the San Francisco-based company when it came to light last week.
Twitter responded by offering Musk a seat on its board, but he suddenly declined the offer on Friday, the same day the appointment was due to become effective. Twitter only announced Musk’s change of heart on Monday following a weekend in which Musk fired off a bunch of now-deleted tweets suggesting various Twitter-related ideas from the serious to the absurd.
The SEC is yet to make any public comment on whether it plans to take action against Musk for his apparent failure to disclose his stock purchase within the stipulated time frame.
Representatives for Musk have also declined to comment on the lawsuit. Musk hasn’t tweeted about it yet, either …