Elon Musk Investing in Twitter is now the focus of a lawsuit.
Musk’s move angered shareholders, who claimed he 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 Musk of violating a regulatory deadline that by then had to disclose that he had raised a stake of at least 5%.
According to the complaint, Musk did not reveal his identity position on twitter He even nearly doubled his stake to more than 9%.
The lawsuit alleges that by March 14, Musk’s stake in Twitter had reached the 5% limit, which would require him to publicly disclose his holdings under US securities law by March 24. He did not disclose it until April 4.
The lawsuit alleges that this strategy harmed less wealthy investors who sold shares in the San Francisco company in the roughly two weeks before Musk admitted he had acquired a large stake.
According to regulatory filings, Musk bought just over 620,000 shares at $36.83 per share on January 31 and then continued to accumulate more shares on nearly every trading day through April 1.
Musk owns 73.1 million shares on Twitter as of Monday. That represents a 9.1% stake in Twitter.
The revelation sent Twitter stock up 27% from its April 1 price near $50 at the end of April 4 trading, depriving investors who sold shares before Musk’s inappropriately belated disclosure of the opportunity to make significant gains, according to the lawsuit filed on behalf of an investor named Mark Payne Russella.
The lawsuit seeks certification as a class action represented by Twitter shareholders who sold shares between March 24 and April 4, a process that could take a year or more.
A SEC spokesperson declined to comment to The Associated Press.
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Musk did not immediately respond to a request for comment posted on Twitter, where he often shares his opinions and thoughts. Alex Spiro, the New York attorney who represents Musk in his ongoing dispute with the Securities and Exchange Commission, did not immediately respond to a query from the Associated Press.
There’s been a whirlwind of headlines since Musk revealed the purchase. He proposed changes to Twitter’s business model, was offered a position on the social media company’s board of directors, which he declined, and conducted a survey asking people on Twitter if they would support the edit button.
The Associated Press contributed to this report.
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