Twitter Investors Sue Elon Musk, Alleging He “Manipulated The Company's Stock Price Lower”

Twitter Investors Sue Elon Musk, Alleging He “Manipulated The Company’s Stock Price Lower”

Among the headaches that Elon Musk faces regarding his proposed takeover of Twitter is now an investor lawsuit claiming that Musk “manipulated the company’s stock price downward” during the course of his involvement in the company.

Investors are alleging that Musk saved himself $156 million by not reporting, in a timely fashion, that he had purchased more than 5% of Twitter by March 14, a new report from Bloomberg/Yahoo says

The investors also asked to be certified as a class and to be awarded both punitive and compensatory damages. In addition to Musk, Twitter was also named as a defendant, as investor agued that the company didn’t do enough to look into Musk’s conduct. 

The suit alleges his conduct was to “drive Twitter’s stock down substantially in order to create leverage.” 

“Musk’s market manipulation worked. Twitter has lost $8 billion in valuation since the buyout was announced,” the lawsuit reads, according to a follow up writeup by Bloomberg Law. 

The suit alleges that Musk continued to buy stock after not disclosing his stake, amassing a 9.2% stake. 

“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” the lawsuit says. It also claims that Tesla’s drop has hampered Musk’s ability to consummate the transaction. 

The lawsuit alleges that Musk’s Tweets about Twitter – namely allegations that the company had too many spam bots and the resultant decision to put the buyout “temporarily on hold” – also were an attempt to drive the share price lower. 

Musk’s motive may have been to stave off a margin call, the report notes:

According to the proposed class action, Musk’s moves were aimed at staving off the risk of a margin call stemming from the fluctuating value of shares in Tesla, the electric vehicle maker he leads, which is “worth much less now than when Musk agreed to buy Twitter” after a 37% drop over the past month. The suit came the same day Musk disclosed that he was partly  restructuring the transaction to offset that risk by providing more than $6 billion in additional equity financing.

The timing of Musk’s disclosures surrounding his stake in the company has already catalyzed and SEC investigation into the matter. As Yahoo/Bloomberg note, “The SEC requires any investor who buys a stake exceeding 5% in a company to disclose their holdings within 10 days of crossing the threshold.”

Tyler Durden
Thu, 05/26/2022 – 14:05

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