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In a stunning new development in Elon Musk’s involvement with Twitter, an investor has filed a lawsuit against the outspoken billionaire accusing him of illegally delaying his disclosure of his stake in the social media giant in order to keep stock prices low so that he could acquire more shares at a lower cost.
The lawsuit which was filed on Tuesday in a Manhattan federal court alleges that the Tesla and SpaceX CEO violated a regulatory deadline to disclose that he owned a stake of more than 5 percent in the company and that Musk waited until he had amassed more than 9 percent, causing harm to less wealthy investors.
According to the class-action lawsuit by plaintiff Marc Bain Rasella, “Musk did not file a Schedule 13 with the SEC within the required time and instead continued to amass Twitter shares, eventually acquiring a 9.1% stake in the Company before finally filing a Schedule 13 on April 4, 2022.”
Musk was required to report that he had exceeded the 5 percent threshold within 10 days according to Securities and Exchange Commission rules but failed to meet the deadline while continuing to buy up shares 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 $39.31 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022 – an increase of approximately 27%.,” the document filed in the Southern District of New York reads. “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 Defendant Musk knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the omissions being made were false and misleading,” the lawsuit states. “Defendant Musk is liable for the false statements pleaded herein.”
The suit comes days after Musk declined to join Twitter’s board, an invitation that reportedly had a condition limiting him from owning more than 14.9 percent of company stock, the news was announced by Parag Agrawal, the CEO of the San-Francisco-based company.
Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk
— Parag Agrawal (@paraga) April 11, 2022
Musk’s rejection of a seat on the board led to speculation that he could be intending to acquire an even greater share in Twitter to increase his influence to force changes at the company which he has been critical of for its censorship.
“Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy,” he tweeted in March. “What should be done?”
Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy.
What should be done? https://t.co/aPS9ycji37
— Elon Musk (@elonmusk) March 26, 2022
Prior to the announcement that he would not be accepting a seat on the board, Musk sent out a series of provocative, since-deleted tweets asking “Is Twitter dying?” and polling users on whether the corporation’s San Francisco headquarters should be converted into a homeless shelter and whether the “w” in Twitter should be deleted. He also suggested that anyone who signs up for the enhanced version of Twitter should be given an authentication check and mused about ending advertising.
“And no ads. The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive,” Musk wrote in the deleted tweet.
Multiple media outlets that published stories on the lawsuit state that Musk has not responded to inquiries for his comments nor has he posted any response to the complaint on Twitter.
According to NBC News, “Twitter declined to comment on the suit.”
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