Elon Musk Sued By Twitter Shareholders Over delay In Disclosing A Stake

Former Twitter shareholders have reportedly sued Elon Musk for the delay in disclosing his stake in the company.

The suit alleges that Elon Musk was required to disclose his stake in Twitter by March 24, but he did not until April 4. The shareholders claimed they did not benefit from the recent rises in its stock price because Musk waited too long to disclose his stake in the company.

In a proposed class action filed in Manhattan federal court, the shareholders said Mr. Musk made “materially false and misleading statements and omissions” by failing to reveal he had invested in Twitter by March 24, as required under federal law.

Mr. Musk, who is also the chief executive of SpaceX and Tesla, purchased a 9.2 percent stake in Twitter on March 14.

The purchase made him the largest shareholder in the company.

After Mr. Musk disclosed his stake on April 4, Twitter shares rose by 27 percent to $US49.97 ($67.13), which investors viewed as a vote of confidence from the world’s richest person.

US securities law requires investors to disclose within 10 days when they have acquired 5 percent of a company, which in Mr. Musk’s case would have been March 24.

The former shareholders, led by Marc Rasella, said the delayed disclosure let Mr Musk buy more Twitter shares at lower prices while defrauding them into selling at “artificially deflated” prices.

Mr. Rasella said he sold 35 Twitter shares for $US1,373 ($1,844) or an average price of $US39.23 ($52.69) between March 25 and 29.

The lawsuit seeks unspecified compensatory and punitive damages.

A lawyer for Mr. Musk had no immediate comment. Tesla is not a defendant.

Twitter announced on April 5 that Mr. Musk would join its board of directors, but this week the company’s chief executive said he had decided not to.

In a note to staff, Twitter’s chief executive; Parag Agrawal said the social media giant would still be “open to” Mr. Musk’s input.

By not joining the board, Mr. Musk can keep buying shares without being bound by his agreement with the company to limit his stake to 14.9 percent.

Mr. Musk is a prolific Twitter user and has previously said he planned to bring about significant improvements at the company. Before taking a stake in the company, Mr. Musk ran a Twitter poll asking users if they believed Twitter adhered to the principles of free speech.

A day after becoming the largest shareholder, he launched another poll asking users if they wanted an edit button — a feature Twitter engineers have been working on.

Some analysts have also suggested Mr. Musk could use his stake to push Twitter to make changes or even pursue an unsolicited bid for the company.

Mr. Musk is worth $US265.1 billion ($355.8 billion), according to Forbes magazine.