As the CEO of electric carmaker Tesla Inc mounts a $44 billion takeover proposal for the social media platform, billionaire Elon Musk has been sued by Twitter Inc investors who say he manipulated the company’s stock price downward.
Musk allegedly saved $156 million by failing to declare that he had purchased more than 5% of Twitter by March 14th, according to the investors. They requested class certification and an undetermined amount of punitive and compensatory damages.
They also listed Twitter as a defendant, claiming that the business owed Musk an investigation, though they are not seeking damages from the company.
According to the lawsuit, filed on Wednesday in federal court in San Francisco, Musk continued to buy the stock after that and eventually announced in early April that he owned 9.2 percent of the firm.
“By delaying the disclosure of his Twitter interest, Musk participated in market manipulation and purchased Twitter stock at an artificially low price,” the investors, led by Virginia resident William Heresniak, claimed.
Musk and his lawyer did not respond to queries for comment right away. Twitter did not respond to requests for comment.
Musk’s ability to finance his acquisition of Twitter is in “serious jeopardy,” according to the investors because he has pledged his shares as security to acquire the loans he needs to buy the firm.
On Thursday afternoon, Tesla’s stock was trading at roughly $713, down from over $1,000 in early April.
According to the Wall Street Journal, the timing of Musk’s ownership announcement has already prompted an investigation by the US Securities and Exchange Commission (SEC).
The Securities and Exchange Commission (SEC) requires any investor who buys more than 5% of a company’s stock to report their holdings within 10 days of passing the threshold.
The investors also claimed that Musk’s public criticism of the company, such as a tweet on May 13 declaring that the buyout was “temporarily on hold” until Twitter showed that spambots accounted for fewer than 5% of its users, was an attempt to drive the stock price further lower.
Musk offered an additional $6.25 billion in equity funding to fund his bid for Twitter on Wednesday, indicating that he is still working on the deal.
Musk was sued by a Florida pension fund in Delaware Chancery Court earlier this month, attempting to prevent the purchase on the grounds that some other major Twitter shareholders were backing the acquisition, which would be illegal under Delaware law. The lawsuit filed by Heresniak does not seek to block the takeover.
