Elon Musk accused of violating law while buying Twitter shares
13 April, 2022
Elon Musk's huge Twitter investment took a twist on Tuesday with the filing of a lawsuit alleging the billionaire illegally delayed disclosing his stake in the social media company so he could buy more shares at lower prices.
The complaint in New York federal court accuses Mr Musk of violating a regulatory deadline to reveal he had accumulated a stake of at least 5 per cent. Instead, according to the complaint, Mr Musk didn’t disclose his position in Twitter until he’d almost doubled his stake to more than 9 per cent.
That strategy, the lawsuit alleges, hurt less wealthy investors who sold shares in the San Francisco company in the nearly two weeks before Mr Musk acknowledged
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holding a major stake. Mr Musk's regulatory filings show he bought a little more than 620,000 shares at $36.83 apiece on January 31 and then continued to accumulate more shares on nearly every single trading day through April 1.Mr Musk, best known as chief executive of the electric vehicle maker Tesla, held 73.1 million Twitter shares as of the most recent count on Monday. That represents a 9.1 per cent stake in Twitter.
The lawsuit alleges that by March 14, Mr Musk's stake in Twitter had reached a 5 per cent threshold that required him to publicly disclose his holdings under US securities law by March 24. Mr Musk didn't make the required disclosure until April 4.
That revelation caused Twitter's stock to soar 27 per cent from its April 1 close to nearly $50 by the end of April 4's trading, depriving investors who sold shares before Mr Musk's improperly delayed disclosure the chance to realise significant gains, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella.
Mr Musk, meanwhile, was able to continue to buy shares that traded in prices ranging from $37.69 to $40.96.
The lawsuit is seeking to be certified as a class action representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take one year or more.
Mr Musk spent about $2.6 billion on Twitter stock - a fraction of his estimated wealth of $265bn, the largest individual fortune in the world.
In a regulatory filing on Monday, Mr Musk disclosed he may increase his stake after backing out of an agreement reached last week to join Twitter's board of directors.
Jacob Walker, one of the lawyers that filed the lawsuit against Mr Musk, told AP he hadn't reached out to the Securities and Exchange Commission about Mr Musk's alleged violations about the disclosure of his Twitter stake.
“I assume the SEC is well aware of what he did," Mr Walker said.
The SEC and Musk have been wrangling in court since 2018 when Mr Musk and Tesla agreed to pay a $40 million fine to settle allegations that he used his Twitter account to mislead investors about a potential buyout of the electric car company that never materialised.
As part of that deal, Mr Musk was supposed to obtain legal approval for his tweets about information that could affect Tesla's stock price - a provision that regulators contend he has occasionally violated and that he now argues unfairly muzzles him.
Mr Musk didn't immediately respond to a request for comment posted on Twitter, where he often shares his opinion and thoughts.
Source: www.thenationalnews.com