Even though Musk has only been Twitter’s largest shareholder for a few weeks, he is already facing a class action lawsuit over his handling of the investment. Several Twitter shareholders have sued Elon Musk over his 11-day delay in disclosing his Twitter investment to the SEC.
In terms of securities law, Musk was required to file paperwork with the SEC by March 24th, ten days after his stake in Twitter grew to 5 percent, but he did not do so until April 4th. Although it might not sound like a big deal, it may have netted him as much as $156 million. In the lawsuit, those gains came at the expense of other shareholders who were not able to profit similarly.
“Investors who sold shares of Twitter stock between March 24, 2022, when Musk was required to have disclosed his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby,” the lawsuit states.
According to the shareholder who brought the suit, he and other investors sold shares at “artificially deflated” prices as a result of Musk’s actions. The suit also alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he had acquired a 5% ownership stake in Twitter as required.”
Twitter and Musk have been dealing with chaos for the past few days. Tesla CEO Elon Musk and noted Twitter troll had initially agreed to join Twitter’s board of directors, much to the dismay of some employees. Following several days of characteristically bizarre tweets from Musk, who polled his Twitter followers on whether it should change its name, and speculated whether the service was “dying,” the decision was abruptly reversed.
Musk, as a board member, would have acted in the best interest of the company and all shareholders, according to Twitter CEO Parag Agrawal, who added that it was “for the best” that Musk would not take the position.