Elon Musk was sued on Tuesday by former Twitter shareholders who claimed they missed out on the recent run-up in stock price because he waited too long to disclose a 9.2% stake in the social media company.
Twitter (NYSE: TWTR) shareholders are suing Elon Musk for failing to disclose that he had purchased a big investment in the company, which influenced the stock price.
Musk was required by federal law to notify the US Securities and Exchange Commission (SEC) within 10 days of purchasing a 5% stake in Twitter, according to the court filings.
The Tesla CEO had been buying shares since January and had purchased 5% of the business by March 14, requiring him to notify the Securities and Exchange Commission by March 24. According to SEC requirements, most people who acquire an interest of 5% or more in a corporation must record their ownership in a Schedule 13G filing within ten days of the transaction.
Musk continued to collect shares after telling the SEC, according to the complaint. On April 4, the Securities and Exchange Commission (SEC) released a document showing that he had purchased more than 9% of Twitter’s stock.
As a result, Musk is regarded as one of Twitter’s significant shareholders, with a holding greater than that of Jack Dorsey, the company’s co-founder, and previous CEO. The value of the company’s stock surged by more than 25% when the news was made public.
Investors miss out on stock price appreciation
According to the lawsuit, investors who sold their shares around the time Musk was scheduled to reveal his position missed out on the market reaction’s share price gain and “were harmed as a result.”
“By omitting to report his ownership holding, Musk was able to acquire shares of Twitter at a lower cost” after the March 24 deadline, according to the complaint.
