His delay in notifying the SEC made Musk richer at the expense of other investors, the suit says.

Elon Musk has only been Twitter’s largest shareholder for a few weeks, but he’s already facing a class action lawsuit over his handling of the investment. A Twitter shareholder has filed a class action lawsuit against Musk over his 11-day delay in officially disclosing his investment in Twitter to the SEC.

Under securities law, Musk was required to file paperwork with the SEC by March 24th — 10 days after his stake in Twitter grew to 5 percent — but he didn’t do so until April 4th. That delay might not sound particularly significant, but it may have netted him as much as $156 million. According to the lawsuit, those gains came at the expense of other shareholders, who were not able to similarly profit.

“Investors who sold shares of Twitter stock between March 24, 2022, when Musk was required to have disclosed his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby,” the lawsuit states.

According to the shareholder who brought the suit, he and other investors sold shares at “artificially deflated” prices as a result of Musk’s actions. The suit also alleges that Musk made “materially false and misleading statements and omissions by failing to disclose to investors that he had acquired a 5% ownership stake in Twitter as required.”

The lawsuit comes after a chaotic few days for Twitter and Musk. The Tesla CEO and noted Twitter troll had initially agreed to join Twitter’s board of directors, much to the dismay of some employees. But the decision was abruptly reversed following several days of characteristically bizarre tweets from Musk, who polled his Twitter followers whether the company should change its name, and speculated on whether the service was “dying.”

In an email to employees, Twitter CEO Parag Agrawal noted that as a board member Musk would have been a "fiduciary of the company, where he, like all board members has to act in the best interest of the company and all our shareholders.” He added that he believed it was “for the best” that Musk ultimately wouldn’t take the position.

Source:
courtesy of ENGADGET

by Karissa Bell

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