Tesla CEO, Elon Musk has been sued by former Twitter Inc shareholders led by Marc Rasella, claiming Musk failed to disclose his 9.2% stake in the social media company within the stipulated period after acquiring it leading Musk buy more Twitter shares at lower prices, while defrauding them into selling at artificially deflated prices.
The lawsuit was filed in Manhattan federal court on behalf of all investors who sold or otherwise disposed of Twitter, Inc. securities between 24th March and 1st April, inclusive. Musk failed to reveal he had invested in Twitter by March 24 as required under federal law. He began acquiring Twitter shares in January and by March 14 had acquired over 5% ownership in Twitter. The U.S. Securities and Exchange Commission requires investors to file a Schedule 13 within 10 days of passing the 5% threshold.
Twitter shares rose 27% on April 4, from $39.31 to $49.97, after Musk disclosed his stake, which investors viewed as a vote of confidence from the world’s richest person in San Francisco-based Twitter.
Twitter announced on 5th April that Musk would join its board of directors, but later said he had decided not to. By not joining the board, Musk, a prolific Twitter user, can keep buying shares without being bound by his agreement with the company to limit his stake to 14.9%.