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• Some Twitter investors say they lost out on potential gains due to this delay
A group of Twitter Inc (NYSE: TWTR) shareholders sued Elon Musk on Tuesday, alleging that the billionaire failed to disclose his acquisition of over 9% stake in the social media company in a suitable timeframe.
Tesla Inc (NASDAQ: TSLA) CEO started buying Twitter shares in January and allegedly amassed a 9.2% stake on March 14.
Federal trade laws dictate that investors must notify the SEC within ten days of acquiring over a 5% stake in any company, which means Musk should have informed the SEC by March 24.
However, on April 4, the billionaire revealed about buying Twitter stocks, leading shares to soar over 25% as investors viewed the move as a vote of confidence.
The lawsuit, filed in New York by law firm Block & Leviton, alleges Musk took advantage of deflated price in the period between passing the 5% threshold and publicly disclosing his stake to buy up more Twitter shares.
The class action case said investors who sold shares of Twitter between March 24, 2022, and before the actual April 4, 2022 disclosure missed the resulting share price increase as the market reacted to Musk’s purchases.
Several legal and securities experts have told The Washington Post that the delay in disclosing about acquiring stakes may have helped Musk around $156 million.
Musk’s abrupt reversal over joining Twitter’s board ignited renewed speculation about the billionaire’s intentions for the social media company, as he is no longer subject to an agreement to keep his stake below 14.9%.
On Monday, an SEC filing said Musk has no “present plans or intentions” to buy more shares. However, Musk “reserves the right to change his plans at any time” after evaluating various factors, including the stock price and the “relative attractiveness of alternative business and investment opportunities.”
Picture Credit: The Guardian
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