The Tesla CEO made “materially false and misleading statements and omissions,” shareholders allege.
The Tesla CEO made “materially false and misleading statements and omissions,” shareholders allege.
Tesla CEO Elon Musk was sued on Tuesday, April 12, 2022 by former Twitter Inc. shareholders who claim they missed the recent rise in the stock price because he waited too long to buy a 9 .2% stake in the social media company.
In a proposed class-action lawsuit filed in Manhattan federal court, shareholders said Mr. Musk, the chief executive officer of electric car company Tesla Inc, made “materially false and misleading statements and omissions” by failing to notify by March 24 disclose that he has invested in Twitter as required by federal law.
Twitter shares rose 27% from $39.31 to $49.97 on April 4 after Mr. Musk announced his stake in what investors saw as a vote of confidence in San Francisco-based Twitter from the world’s richest person.
Former shareholders, led by Marc Rasella, said the delayed disclosure allowed Mr Musk to buy more Twitter stock at lower prices while enticing them to sell at “artificially deflated” prices.
The lawsuit seeks unspecified and punitive damages.
An attorney for Mr. Musk had no immediate comment. Tesla is not a defendant.
US law
US securities law requires investors to disclose within 10 days if they have acquired 5% of a company, which would have been March 24 in Mr Musk’s case.
Twitter announced on April 5 that Mr. Musk would join its board, but said this week he had decided against it.
By not joining the board, Mr. Musk, a prolific Twitter user, can continue to buy shares without being bound by his agreement with the company to cap his stake at 14.9%.
Some analysts have suggested Mr Musk could be pushing Twitter to make changes or even submitting an unsolicited bid for the company.
Mr. Rasella said he sold 35 shares of Twitter between March 25 and March 29 for $1,373, or an average price of $39.23. Mr. Musk is reportedly worth $265.1 billion forbes Magazine.
