Elon Musk sued by Twitter investor for delay in disclosure of his shares
Lawsuit claims Musk’s delay in disclosing stake took away chance for other investors to realise gains
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.A Twitter shareholder has sued Tesla and SpaceX chief Elon Musk alleging the multibillionaire illegally delayed disclosing his stake in the social media company to buy more shares at lower prices.
The complaint reportedly filed in New York federal court accuses the Tesla chief of violating a regulatory deadline to disclose his stake in Twitter when it was at least 5 per cent.
Instead, Mr Musk announced details of his shares in the company only after it almost doubled to just under 10 per cent, the complaint says.
The class action filed in the Manhattan federal court accused the billionaire of making “materially false and misleading statements and omissions” by failing to disclose his investment in Twitter by 24 March as per federal law.
Mr Musk’s regulatory filings reveal that he bought about 620,000 shares at $36.83 apiece on 31 January, and continued to rack up more stake in the company through 1 April.
Securities law in the US require investors to disclose their shares within 10 days when they have acquired 5 per cent stake of a company, which in Mr Musk’s case would have been 24 March.
When the SpaceX chief finally did disclose his stake in Twitter on 4 April, the social media platform’s stock rose to about 27 per cent compared to its 1 April close.
The lawsuit filed on behalf of an investor named Marc Bain Rasella claims the delay in disclosure took away the chance for several investors to realise significant gains.
But meanwhile, it let the billionaire continue to buy shares that traded in prices ranging from $37.69 to $40.96, with Mr Musk spending about $2.6b on Twitter stock over the weeks.
“By failing to disclose his ownership stake ... Musk was able to acquire shares of Twitter less expensively during the Class Period,” the lawsuit noted.
It says the delay also hurt less wealthy investors who sold their Twitter shares in the two weeks before the billionaire acknowledged holding a major stake.
Citing these reasons, the lawsuit seeks unspecified compensatory and punitive damages.
While Twitter had initially announced Mr Musk was joining its board, the social media giant said on Monday that the billionaire had declined the offer.
By not joining the company’s board of directors, the world’s richest man has the option to build a bigger stake in Twitter which would have otherwise been limited to about 15 per cent or below.
Some analysts say this may allow Mr Musk to rack up more shares in the company – possibly take over Twitter – or help elect a slate of directors more aligned with his thinking.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments