Elon Musk recently acquired a huge stake in Twitter after publicly posting his interest in creating a social media company.
Twitter co-founder Jack Dorsey and new CEO Parag Agrawal were both excited to welcome Musk to Twitter. Agrawal even appointed Musk to be on the board of directors.
But on Tuesday, April 12, Marc Bain Rasella, a Twitter shareholder, filed a lawsuit against Tesla CEO Elon Musk, alleging that Musk manipulated Twitter's share price by delaying an announcement that he had acquired over 5% ownership in the company by March 14, breaking SEC rules in the process.
Elon Musk's Lawsuit for Twitter Stocks
By March 14, Elon Musk had acquired more than a 5% stake in Twitter. According to Block & Leviton, which filed the complaint in the United States District Court for the Southern District of New York, this will require Musk to file a Schedule 13 form with the United States Securities and Exchange Commission within 10 days of acquiring the stake.
The complaint, filed in the U.S. District Court for the Southern District of New York, claims that Musk's failure to make the required disclosure within 10 days of acquiring the stake in Twitter allowed him to purchase more shares at a lower price than he would have otherwise.
The filing says that he cheated shareholders who sold their shares while he was in charge.
However, Musk didn't file a Schedule 13 until April 4, the complaint alleges. After disclosing his ownership stake, Twitter's shares rose by more than 27%, from $39.31 per share on April 1 to $49.97 per share on April 4. Musk ended up acquiring a 9.2% stake in Twitter.
According to CNET, the complaint states that "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."
As a result of Musk's failure to disclose his ownership stake in Twitter through Schedule 13, he was able to acquire shares at a lower cost during the class period.
According to Forbes, Rasella is trying to make his lawsuit into a class action on behalf of all investors who sold or otherwise disposed of their Twitter stock between March 24 and April 1, which was the Friday before Tesla CEO Elon Musk announced that he was going to make the company public.
Furthermore, Rosella's complaint also seeks compensation for the damages that have been caused to all Twitter investors.
Elon Musk's Twitter Shares
Elon Musk has now become the largest shareholder of Twitter after recently purchasing 9.2% of its stock. As expected, Twitter stocks soared in trading prices after the filing became public.
Musk did not disclose the amount he paid for the shares, but according to CNN, his holdings were worth $2.9 billion at the close of trading on April 8, and $3.5 billion on Monday, April 11.
Musk's filing did not provide any information about the purpose of the purchase or his future plans for the company. However, he has previously been a vocal critic of Twitter's policies, which have garnered widespread attention. He said in the past that he was giving "serious thought" to making a new social media platform.
Related Article: Twitter Confirms Addition of Edit Button - Is Elon Musk Responsible?
