- Kyle Chua
Elon Musk Sued for Allegedly Manipulating Twitter Stock Prior to Announcing Takeover Bid
Elon Musk is facing another lawsuit over his much-talked-about bid to buy out micro-blogging platform Twitter. The billionaire was sued by Twitter shareholders on 26 May for allegedly manipulating the company's stock price to save himself more than a hundred million dollars in the takeover.
The lawsuit, which was filed in federal district court in San Francisco, claims Musk saved US$156 million by not disclosing that he already owned more than 5% of Twitter by 14 March, as Reuters reports. Musk supposedly only disclosed his stake when he announced he owned 9.2% of the company in April.
"By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price," said the complainants. They expect to be awarded an unspecified amount of compensatory damages, which will reportedly be distributed among owners of the company's stock.
Twitter itself was also named as a defendant in the suit for allegedly failing to uphold its obligation of investigating Musk's unusual conduct regarding the deal. The shareholders, however, aren't seeking damages from the company.
Musk's statements after signing the takeover agreement on 25 April were also brought to question by the suit. The Tesla owner earlier this month said the deal was on hold until he could confirm that spam and fake accounts on the site did indeed account for less than 5% of the userbase. The result of which, as the suit alleges, created doubts about the deal and tanked Twitter's stock. This supposedly favoured Musk as he would be able to back out if he wanted to or re-negotiate a much lower price for the buyout.
“As detailed herein, Musk’s conduct was and continues to be illegal, in violation of the California Corporations Code, and contrary to the contractual terms he agreed to in the deal,” as written in the suit.
Musk and his lawyers did not respond to requests for comment, while Twitter declined.
Reuters further notes that Tesla's shares were being sold for US$713 on Thursday, which quite a difference from the US$1,000 it was trading for in early April.
Earlier this month, Musk was also sued by a Florida pension fund in Delaware Chancery Court for having agreements with other big shareholders to support the buyout, a violation of Delaware law.
Elon Musk was sued by Twitter shareholders for allegedly manipulating the company's stock price to save himself more than a hundred million dollars in the takeover.
The lawsuit, which was filed in federal district court in San Francisco, claims Musk saved US$156 million by not disclosing that he already owned more than 5% of Twitter.
His statements after singing the buyout agreement also allegedly played a factor in creating doubts about the deal and Twitter's stock tanking. This supposedly favoured Musk because he would be able to back out of his bid or re-negotiate a new deal.