Elon Musk accused of breaking the law by buying shares of Twitter
Elon Musk’s huge investment in Twitter took a new turn Tuesday with the filing of a lawsuit alleging the colorful billionaire illegally delayed disclosing his large stake in the social media company so he could buy more shares at lower prices.
The lawsuit in New York federal court accuses Musk of violating a statutory deadline to reveal that he had amassed a stake of at least 5%. Instead, according to the complaint, Musk did not reveal his position on Twitter until he nearly doubled his share to more than 9%. That strategy, the suit alleges, hurt less wealthy investors who sold shares of the San Francisco company in the nearly two weeks before Musk acknowledged holding a significant stake.
Musk’s regulatory filings show he bought just over 620,000 shares at $36.83 each on January 31 and then continued to accumulate more shares on almost every trading day through April 1. Musk, best known as chief executive of electric car maker Tesla, had 73.1 million shares of Twitter according to the most recent count on Monday. That represents a 9.1% share of Twitter.
The lawsuit alleges that by March 14, Musk’s holding in Twitter had reached a 5% threshold requiring him to publicly disclose his holdings under US securities law by March 24. Musk did not make the required disclosure until April 4.
That revelation sent shares of Twitter soaring 27% from the close on April 1 to almost $50 at the end of trading on April 4, depriving investors who sold shares before Musk unduly delayed the opportunity. to make significant profits, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella. In the meantime, Musk was able to continue buying stocks that were trading at prices ranging from $37.69 to $40.96.
The lawsuit seeks to be certified as a class action lawsuit representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take a year or more.
Musk spent about $2.6 billion on Twitter stock, a fraction of his estimated $265 billion wealth, the largest individual fortune in the world. In a regulatory filing on Monday, Musk revealed that he could increase his stake after withdrawing from a deal struck last week to join Twitter’s board of directors.
Jacob Walker, one of the attorneys who filed the lawsuit against Musk, told The Associated Press that he had not contacted the Securities and Exchange Commission about Musk’s alleged violations of his Twitter involvement disclosure. “I guess the SEC is very aware of what he did,” Walker said.
An SEC spokesman declined to comment.
The SEC and Musk have been arguing in court since 2018, when Musk and Tesla agreed to pay a $40 million fine to settle allegations that he used his Twitter account to mislead investors about a potential purchase of the company. electric cars that never materialized. As part of that deal, Musk was supposed to get legal approval for his tweets about information that could affect Tesla’s share price, a provision regulators say he has occasionally violated and now argues unfairly gags him.
Musk did not immediately respond to a request for comment posted on Twitter, where he often shares his opinion and thoughts. Alex Spiro, a New York attorney representing Musk in his ongoing dispute with the SEC, also did not immediately respond to a query from The Associated Press.