Engulfed in drama once again, tech titan Elon Musk- who recently became Twitter’s largest shareholder- has been accused of illegally delaying disclosing his stake in the social media company so he could buy more shares at lower prices.
A lawsuit has been filed against Musk in a New York federal court, that accuses him of violating a regulatory deadline to reveal he had accumulated a stake of at least 5%. Instead, according to the complaint, Musk didn’t disclose his position in Twitter until he’d almost doubled his stake to more than 9%.
That strategy, the lawsuit alleges, hurt less wealthy investors who sold shares in the San Francisco company in the nearly two weeks before Musk acknowledged holding a major stake.
The lawsuit alleges that by March 14, Musk’s stake in Twitter had reached a 5% threshold that required him to publicly disclose his holdings under U.S. securities law by March 24. Musk didn’t make the required disclosure until April 4.
That revelation caused Twitter’s stock to soar 27% from its April 1 close to nearly $50 by the end of April 4’s trading, depriving investors who sold shares before Musk’s improperly delayed disclosure the chance to realize significant gains, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella. Musk, meanwhile, was able to continue to buy shares that traded in prices ranging from $37.69 to $40.96.
The lawsuit is seeking to be certified as a class action representing Twitter shareholders who sold shares between March 24 and April 4.