Enter your email to read this article
Read news on any topic, in one place, from publishers like The Economist, FT, Bloomberg and more.

Twitter investor sues Elon Musk for failure to promptly disclose his shares

image of elon musk's twitter page next to twitter logo
Elon Musk’s delayed disclosure meant he was able to buy additional shares in Twitter at a deflated price, the lawsuit claims. Photograph: Rafael Henrique/Sopa Images/Rex/Shutterstock

A Twitter shareholder is suing Elon Musk for failing to disclose that he had bought a substantial stake in the company, affecting share prices.

The Tesla CEO revealed on 4 April that he had acquired a 9.2% stake in Twitter. Shares of the social media company soared, as investors viewed the move as a vote of confidence from the richest man in the world.

However, federal trade laws require that investors notify the Securities and Exchange Commission (SEC) after surpassing a 5% stake in a company within 10 days. Musk acquired his shares on 14 March but did not make that public until 4 April.

In the time between passing the 5% threshold and publicly reporting, Musk was able to buy up additional shares at a deflated price, the new lawsuit alleges. Experts estimate that delay may have illegally netted Musk $156m.

Filed in a New York federal court on Tuesday, the suit seeks class action status on behalf of investors who sold Twitter stock during that time and lost out on gains they would have realized had Musk disclosed his stake earlier.

After Musk disclosed his stake, Twitter shares rose 27% – from $39.31 to $49.97. The plaintiff in the suit sold 35 Twitter shares for $1,373, or an average price of $39.23, before Musk revealed his investments.

Jeffrey Block, of the law firm representing the plaintiff, confirmed the suit had been filed as of Tuesday. The lawsuit seeks a jury trial for unspecified compensatory and punitive damages. Musk did not immediately respond to a request for comment.

The SEC did not immediately respond to a request for comment regarding whether it would also take action against Musk.

Musk’s announcement that he had acquired a 9.2% stake – making him the company’s largest shareholder at the time – caused immediate controversy. Many speculated the acquisition could allow Musk, a vocal critic of Twitter, to push the company to make broader changes.

Twitter announced on 5 April that Musk would join its board of directors, but on Sunday, Twitter’s CEO, Parag Agrawal, announced abruptly that Musk would not be joining the board after all.

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%. After the news of the U-turn broke, Musk tweeted and then deleted a hand-over-mouth emoji.

Reuters contributed to this report

Related Stories
Elon Musk sued for alleged delay in disclosing 9.2% Twitter stake
Increase in shares meant that Tesla boss was required to notify SEC within 10 days of ownership boost
From analysis to the latest developments in health, read the most diverse news in one place.
Elon Musk is sued by shareholders over delay in disclosing Twitter stake
US securities law requires investors to disclose within 10 days when they have acquired 5% of a company, which in Musk's case would have been March 24. .Twitter announced on April 5 that Musk would join its board of directors, but this week said he had decided not to
Twitter Shareholder Sues Musk, Saying He Misled Investors
A shareholder seeks class-action status for suit that claims Elon Musk’s delay in disclosing his stake in Twitter temporarily held down the company’s stock price, cheating shareholders who sold stock in that period.
Elon Musk Sued By Former Twitter Shareholders Over Late Stake Disclosure: Report
Tesla Inc (NASDAQ: TSLA) CEO Elon Musk was on Tuesday sued by former Twitter Inc (NYSE: TWTR) shareholders for failing to r
From avid user to owner: A timeline of Elon Musk’s interest in Twitter
In a matter of weeks, Tesla billionaire has gone from an avid user of Twitter to acquirer. Along the way he has flirted with the idea of joining the board after becoming Twitter’s biggest independent shareholder.
One place to find news on any topic, from hundreds of sites.
The weeks that shook Twitter: How Elon Musk built his stake
NEW DELHI: Twitter users woke up April 4 and found the words “Elon” and “Elon Musk” trending on the site — not because the world’s richest, most-followed businessman had caused a stir with his futuristic companies, but because he’d disclosed a major stake in Twitter Inc.