A Twitter shareholder is suing Tesla CEO, Elon Musk in a federal securities class action lawsuit for failing to disclose his 5% stake in the social media company when he was required to do so.
The delay allowed Musk to buy more shares of Twitter at a lower price and cheat sellers of Twitter stock out of increased profits, claims the plaintiff.
The Tesla CEO revealed on 4 April that he had acquired a 9.2% stake in Twitter. Shares in the social media company soared, as investors viewed the move as a vote of confidence from the richest man in the world.
The lawsuit was filed in Manhattan Federal Court on Tuesday by Marc Bain Rasella on behalf of “all investors who sold or otherwise disposed of Twitter, Inc. securities between March 24, 2022 and April 1, 2022, inclusive.”
According to the Lawsuit, 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.
“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%,” reads the lawsuit.
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, says the plaintiff.