Recently Elon Musk bought stock from Twitter Inc (NYSE: TWTR). He was soon after added to the board of directors with approval from both the company’s current and former CEOs. However, a lawsuit had been filed against Musk over this investment.
Musk didn’t disclose his stake when he was supposed to
The lawsuit alleges that Musk intentionally failed to disclose his stake in the company on time so he could purchase more stock at lower prices. It also claims that the billionaire had violated a regulator deadline that required him to show that he had a 5% stake in the company. It alleges that he didn’t disclose this amount until his stake had increased to 9%.
According to the lawsuit, the move was illegal and negatively impacted less wealthy investors as they sold shares two weeks before Musk revealed his stake.
Musk’s filings show that he purchased 620,000 shares at $36.83 per share. This purchase was on January 31. After the transaction, Musk accumulated shares on every trading day until April 1. He currently has 73.1 million Twitter shares.
According to the lawsuit, Musk had a 5% stake in Twitter by March 14. At this point, the Securities and Exchange Commission (SEC) required the billionaire to report his filings before March 24. However, Musk didn’t make a move before April 14.
When Musk disclosed his stake, Twitter shares rose to $50. The suit indicates that if Musk had disclosed his stake when he was supposed to, investors who had sold their shares would have gotten more profits.
Marc Bain Rasella hopes the lawsuit could become a class action
The suit was filed on behalf of Marc Bain Rasella, an investor. Rasella hopes to get the lawsuit certified as a class action. It would represent shareholders who sold their stock between March 24 and April 4. However, this process could take one year.
In addition, Musk spent $2.6 billion on his Twitter stake. He also changed his mind about joining the company’s board of directors and disclosed that he planned to increase his shares. Jacob Walker, a lawyer involved in the lawsuit against Musk, hasn’t spoken to the SEC regarding the violation stating that the regulator must already know.
