A group of investors in Twitter is suing Elon Musk for allegedly forcing down the social media company’s stock price as the billionaire CEO of Tesla reassesses his $44-billion takeover bid.
The lawsuit also named Twitter as a defendant, arguing that the company had an obligation to investigate Musk’s conduct.
The investors said Musk saved himself $156 million by failing to disclose that he had purchased more than 5% of Twitter by March 14.
They sought certification as a class action and to be awarded an unspecified amount of punitive and compensatory damages. The investors are not seeking any damages from Twitter.
The suit alleges Musk continued to buy stock after March 14, before he disclosed in early April that he owned 9.2% of the company.
“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” the investors, led by Virginia resident William Heresniak, said.
‘Tesla Stock Fall Puts Bid in Peril’
Neither Musk nor his lawyer immediately responded to requests for comment. Twitter declined to comment.
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.
Tesla’s shares were trading at around $713 on Thursday afternoon, down from above $1,000 in early April.
The timing of Musk’s disclosure of his stake has already triggered an investigation by the US Securities and Exchange Commission (SEC), The Wall Street Journal reported earlier this month.
The SEC requires any investor who buys a stake exceeding 5% in a company to disclose their holdings within 10 days of crossing the threshold.
The CEO of Tesla was sued earlier this month 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.
Heresniak’s lawsuit does not seek to stop the takeover.
- Reuters, with additional editing by George Russell