Elon Musk’s Twitter investment took a new turn on Tuesday when a stakeholder filed a class-action lawsuit over the way his $3 billion investment was handled.
Marc Rasella filed a lawsuit against Elon, alleging that he had delayed revealing his ownership in the social media company to buy additional shares at a lower price. The investor claims Tesla CEO Elon Musk of failing to meet a deadline to report that he had purchased a stock of at least 5% until he had nearly quadrupled his stake to more than 9%.
Securities law required Musk to file the filings with the SEC by March 24, ten days after his 5% purchase. However, he did not do so until April 4th, potentially garnering him AU$209 million (US$156 million) at the expense of other stockholders who were unable to profit in the same way.
“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 thereby,” the lawsuit states.
According to regulatory records, Musk purchased a little more than 620,000 shares on January 31 and accumulated more shares every trading day until April 1.
According to the lawsuit, Musk attained a 5% position on March 14, compelling him to publicly declare his ownership under US securities law.
Twitter shares increased by 27% after Musk announced his investment on April 4, with investors considering it a vote of confidence from Musk.
Mr Rasella stated that between March 25 and 29, he sold 35 Twitter shares for AU$1,844 (US$1,373) at an average price of AU$52.69 (US$39.23). He claims that the delay in Musk’s announcement of his stake tricked sellers into selling at ‘artificially deflated’ pricing.