Elon Musk has only been Twitter’s largest shareholder for a few weeks, but he’s already facing a class-action lawsuit over his handling of the investment. A Twitter contributor is suing Musk for an 11-day delay in officially disclosing his investment in Twitter to the SEC.
Under the Securities Act, Musk was required to file papers with the SEC by March 24 — 10 days after his Twitter stake grew to 5% — but he didn’t do so until April 4. This delay may not seem particularly significant, but it may have hit him just as hard. According to the lawsuit, these gains came at the expense of other shareholders who were unable to generate a similar profit.
“Investors who sold Twitter shares between March 24, 2022, when Musk was asked to disclose his ownership of Twitter, and prior to the actual disclosure on April 4, 2022, missed the resulting increase in the share price as the market reacted to Musk’s purchases and was hurt by doing so,” the lawsuit states.
According to the contributor who filed the lawsuit, he and other investors sold shares at “artificially discounted” prices as a result of Musk’s actions. The lawsuit also alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he acquired a 5% ownership interest in Twitter as required.”
The lawsuit comes after a few days of chaos for Twitter and Musk. Tesla CEO and Twitter troll initially approved Twitter’s board of directors, and much of some employees. But the decision was abruptly undone after several days of distinctly odd tweets from Musk, who polled his Twitter followers about whether the company should change its name, and speculated whether the service was “dying.”
In an email to employees, Twitter CEO Paraj Agrawal noted that as a board member, Musk was “an agent of the company, who, like all directors, has to act in the best interests of the company and all of our shareholders.” He added that he believed it was “better” that Musk eventually not take the position.