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• Musk received second lawsuit over delay in disclosing his stake buildup in Twitter
• SEC has also triggered a probe as Musk failed to reveal his 5% stake in Twitter before buying another 4.2% stake
A group of Twitter Inc (NYSE: TWTR) shareholders sued billionaire Elon Musk over not disclosing his stake in the social media company properly.
The lawsuit, filed on Wednesday in San Francisco federal court, claimed Musk manipulated Twitter’s stock by not disclosing that he had purchased more than a 5% stake in the microblogging platform by March 14.
The investors said Musk saved himself $156 million by continuing to buy the stock at a discounted rate and ultimately disclosed in early April that he owned 9.2% of the company, the lawsuit claimed.
“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 investors, led by Virginia resident William Heresniak, who also named Twitter as a defendant, arguing the company had an obligation to investigate Musk’s conduct.
The investors also said Musk’s criticism against Twitter, including a May 13 tweet stating the buyout is “temporarily on hold” until the social media company proved that spam bots accounted for less than 5% of its users, amounted to an attempt to drive the share price further down, which would help him to buy Twitter at a lower price.
Lawsuits piling up
The timing of Musk’s disclosure has also triggered an investigation by the US Securities and Exchange Commission (SEC), the Wall Street Journal reported earlier this month.
The market regulators require any investor who buys a stake exceeding 5% in a company to disclose their holdings within ten days of crossing the threshold, which Musk failed to do so.
Moreover, the lawsuit is the latest addition to a list of other cases around Musk and Twitter.
In April, the billionaire was sued in New York by the law firm Block & Leviton regarding the delay in disclosure.
Musk was sued earlier this month in Delaware Chancery Court by a Florida pension fund seeking to halt the takeover deal because some other big Twitter shareholders were supporting the buyout, a violation of Delaware law.
Picture Credit: TechRadar
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