Twitter Shareholder Sues Musk, Saying He Misled Investors

The topline

A Twitter shareholder Tuesday filed a lawsuit against Tesla CEO Elon Musk alleging that Musk manipulated Twitter’s share price by delaying an announcement that he had acquired over 5% ownership in the company by March 14, breaking SEC rules in the process.

Tesla CEO Elon Musk was at the construction site for a future Tesla Plant on September 3, 2020. … [+] Gruenheide near Berlin.

ODD ANDERSEN/AFP via Getty Images

Here are some key facts

In a complaint with the U.S. District Court for the Southern District of New York, Twitter shareholder Marc Bain Rasella claimed that Musk’s delay in making the required disclosure within 10 days of acquiring a 5% stake in Twitter allowed him to buy more shares at a lower price than he would have otherwise, raising his shareholdings to 9.1%, and cheating shareholders who sold in the interim.

Twitter’s share price rose by about 27% from $39.31 on April 1, to $49.97 April 4, after Musk revealed his stake in the company.

Rasella is seeking class-action status for his lawsuit on behalf of all investors who sold “or otherwise disposed of” Twitter stock between March 24 and April 1, the Friday before Musk’s announcement.

Twitter has not yet responded to the request for comment.

Important Background

After becoming Twitter’s largest shareholder, Musk was invited to join the 11-seat board of directors, an offer he at first appeared to accept, agreeing not to buy more than 14.9% stake in the company or to take it over. On Sunday Musk changed his mind, with Parag Agrawal as Twitter CEO. announcing that Musk would not join the board, though the board would remain “open to his input.” Over the weekend, Musk posted a string of provocative tweets, asking, “Is Twitter dying?” and liking a tweet claiming that Musk was told to “not speak freely” after becoming Twitter’s biggest shareholder.