Elon Musk was sued Tuesday by former shareholders of Twitter Inc who allege they missed the recent rise in its share price because he waited too long to disclose a 9.2% stake in the social media company.
In a proposed class action filed in Manhattan federal court, shareholders said Musk, the CEO of electric car company Tesla Inc, has made “materially false and misleading statements and omissions” by failing to disclose that he was on Twitter before March 24. invested as required. under federal law.
Twitter shares rose 27% to $49.97 from $39.31 on April 4 after Musk disclosed his stake, which investors saw as a vote of confidence by the world’s richest person in Twitter in San Francisco.
Former shareholders led by Marc Rasella said the delayed disclosure allowed Musk to buy more Twitter stock at lower prices, while being scammed into selling at “artificially low” prices.
The lawsuit seeks unspecified compensatory and punitive damages.
A lawyer for Musk did not immediately comment. Tesla is not a defendant.
The US securities law requires investors to disclose within 10 days when they have acquired 5% of a company, which in Musk’s case would have been March 24.
Twitter announced on April 5 that Musk would join its board of directors, but this week said it had decided not to.
By not joining the board, Musk, a prolific Twitter user, can continue to buy stock without being bound by his agreement with the company to limit his stake to 14.9%.
Some analysts have suggested Musk could push Twitter to make changes, or even make an unsolicited offer for the company.
Rasella said he sold 35 Twitter shares between March 25 and 29 for $1,373, or an average price of $39.23. Musk is worth $265.1 billion, according to Forbes magazine.
The case is Rasella v Musk, US District Court, Southern District of New York, No. 22-03026.
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