- Tesla chief Elon Musk was sued by Twitter investors for manipulating stock price.
- Musk saved himself US$156 million by delaying the announcement of his Twitter stake, say investors.
- Musk was also sued by the SEC for his timing of the disclosure.
Electric vehicle maker Tesla’s chief executive Elon Musk has been sued by Twitter (NYSE: TWTR) investors for manipulating the stock price of the social media company downward during his US$44 billion takeover bid.
The investors have accused Musk failed to disclose that he had bought over 5% of Twitter by March 14. By doing this, the Tesla Inc (Nasdaq: TSLA) chief had saved himself US$156 million.
The investors have asked to be certified as a class and be awarded punitive and compensatory damages of an unspecified amount.
They have also declared Twitter as a defendant in the case, saying that it is obligatory on its (Twitter’s) part to dig into Musk’s conduct. However, they are not asking for compensation from Twitter.
Elon Musk kept on buying Twitter stock and it was only in early April divulged that he owned 9.2% of the company, as per the lawsuit filed on Wednesday in San Francisco federal court.
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Musk indulged in market manipulation: Twitter investors
The investors said that he delayed his disclosure of Twitter’s stake to manipulate and buy more stocks of the social media company at an artificially low price.
Not only Twitter investors, but even the U.S. Securities and Exchange Commission (SEC) had taken umbrage at Musk’s delayed disclosure.
The WSJ reported an investigation by the SEC regarding the matter early this month. He was supposed to disclose his Twitter stake within 10 days of the purchase. SEC mandates that anyone owning 5% or more of any company should disclose it within that time frame.
No comment has come from Musk or his attorney. Neither Twitter has issued any statement on the matter.
The recent drop in Tesla’s stock has jeopardized Musk’s capacity to finance his Twitter acquisition as he has pledged his shares as collateral to secure loans for buying the company.
In early April Tesla's shares were above US$1,000 and they were trading at around US$713 on Thursday afternoon.
A Florida pension fund had also sued Musk earlier this month in Delaware Chancery Court, seeking to pull the plugs on the Twitter deal, saying some big Twitter shareholders were pressing for the buyout. It is a violation of Delaware law.