A Twitter shareholder on Tuesday filed a proposed class action lawsuit against Elon Musk, alleging the Tesla and SpaceX CEO violated securities regulations by not revealing he’d taken a stake in the social network in a timely manner.
Musk acquired more than a 5% stake in Twitter by March 14, which requires him to file a Schedule 13 form with the US Securities and Exchange Commission within 10 days, according to Block & Leviton, which filed the complaint in the District Court for the Southern District of New York.
However, Musk didn’t file a Schedule 13 until April 4, the complaint alleges. After disclosing his ownership stake, Twitter’s shared 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.
“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,” the complaint alleges. “By failing to disclose his ownership stake via Schedule 13, Musk was able to acquire shares of Twitter less expensively during the class period.”
The plaintiff in the lawsuit sold Twitter shares during the class period and is seeking compensation and punitive damages, according to the complaint.
Twitter declined to comment. Musk couldn’t be reached for comment.
Musk turned down the opportunity to serve on Twitter’s board of directors on April 9, the day his appointment was intended to go into effect. The decision followed Musk’s disclosure on April 4 that he had acquired a 9.2% stake in Twitter, which makes him the company’s largest shareholder.
