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Saturday, December 3, 2022

Elon Musk sued for breaking law in Twitter stock purchase

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Elon Musk’s massive Twitter investment took a new turn on Tuesday, with the filing of a lawsuit
alleging that the Tesla boss illegally delayed revealing his ownership in the social media
platform in order to purchase additional shares at lower rates.
Musk is accused of violating a regulatory deadline to report he had obtained a stake of at least
5% in the company, according to a complaint filed in federal court in New York.
Instead, according to the complaint, Musk did not disclose his Twitter stake until he had nearly
doubled it to more than 9 percent. The complaint claims that Musk’s plan harmed less wealthy
investors who sold shares in the San Francisco business in the almost two weeks before Musk
admitted to owning a significant position.
According to regulatory filings, Musk purchased a little more than 620,000 shares at $36.83 each
on Jan. 31 and then continued to amass more shares on practically every trading day through
April 1. Musk, best known as the CEO of the electric vehicle company Tesla, had 73.1 million
Twitter shares as of Monday’s count. This equates to a 9.1 percent ownership in Twitter.
According to the lawsuit, Musk’s interest in Twitter had hit a 5 percent threshold by March 14,
requiring him to publicly declare his ownership under US securities law by March 24. Musk
waited until April 4 to make the obligatory disclosure.
According to the lawsuit filed on behalf of an investor named Marc Bain Rasella, that revelation
caused Twitter’s stock to soar 27 percent from its April 1 close to nearly $50 by the end of April
4 trading, depriving investors who sold shares prior to Musk’s improperly delayed disclosure of
the opportunity to realize significant gains.
Meanwhile, Musk was able to continue purchasing shares at prices ranging from $37.69 to
The complaint seeks class-action status for Twitter shareholders who sold shares between March
24 and April 4, a process that might take a year or more.
Musk paid approximately $2.6 billion on Twitter stock, a fraction of his estimated wealth of
$265 billion, the world’s highest individual fortune. Musk said in a regulatory filing Monday that
he may expand his interest after withdrawing from an agreement to join Twitter’s board of
directors made last week.

One of the lawyers who brought the complaint against Musk, Jacob Walker, stated that he had
not contacted the Securities and Exchange Commission about Musk’s alleged violations
regarding the disclosure of his Twitter holdings.
“I’m sure the SEC is well aware of what he did,” Walker speculated.
The SEC and Musk have been fighting in court since 2018, when Musk and Tesla agreed to pay
a $40 million fine to settle claims that he used his Twitter account to mislead investors about a
prospective buyout of the electric car business that never happened.
As part of that agreement, Musk was required to acquire legal approval for tweets containing
information that could affect Tesla’s stock price – a restriction that authorities claim he has
occasionally broken and that he now claims unfairly muzzles him.

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