A lawsuit filed at the Manhattan federal court by Marc Bain Rasella states that Mr Musk failed to divulge his Twitter stake by March 24 and is suin
A lawsuit filed at the Manhattan federal court by Marc Bain Rasella states that Mr Musk failed to divulge his Twitter stake by March 24 and is suing him for alleged securities fraud. The lawsuit seeking class action on behalf of investors states that Mr Musk made “materially false and misleading statements and omissions” by not revealing his investment in Twitter by the March deadline.
A lawyer for Mr Musk has made no comment and Tesla is not a defendant.
US law states that when investors have acquired five percent of a company, they must disclose this within 10 days, which for Mr Musk would have been this deadline of March 24.
By the time Mr Musk disclosed his share on April 4, Twitter shares increased by 27 percent from $39.31 (£30.24) to $49.97 (£38.44), after investors saw his investment as a sign of confidence in the company.
Marc Rasella and other shareholders have argued that the delay allowed Mr Musk to buy more shares at a lower price and this defrauded them into selling at “artificially deflated” prices.
The lawsuit that has been submitted is seeking unspecified compensatory and punitive damages.
Twitter CEO Parag Agrawal announced on April 11 that after Mr Musk’s investment he was welcomed to the Twitter board, but the SpaceX founder later rejected the offer.
Mr Agrawal tweeted: “Elon Musk has decided not to join our board…We were excited to collaborate and clear about the risks.
“We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interest of the company and all our shareholders, was the best path forward…
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One of these ‘distractions’ could be the fact that now Mr Musk has rejected being a member of the Twitter board, he can continue buying company shares.
By being disconnected from the board, he is not bound by company contract to keep his stake in the company to 14.9 percent.
Mr Musk could hold huge sway over the direction of the company and has even been conducting polls on his Twitter account about features on the platform, from introducing an edit button to joking about “taking the w out of Twitter”.