Apparently the richest man in the world is not shy about trying to get a discount.
In a new lawsuit, Twitter shareholders are suing Elon Musk, alleging he manipulated the company’s stock price for his own benefit by agreeing to buy the company. The lawsuit represents a group of Twitter investors but would allow any shareholder to receive financial compensation.
The lawsuit was filed in federal district court in Northern California on Wednesday and alleges that Musk intentionally reduced the company’s stock to get a better deal. “The fair market value of Twitter securities was affected by Musk’s misrepresentations and misconduct,” the complaint states.
The lawsuit cites Musk’s decision to waive due diligence as a condition of the acquisition and his later suspicious claim that Twitter misrepresented the number of bots on its platform.
“At the time, Musk was well aware that Twitter had a number of ‘fake accounts’ and accounts controlled by ‘bots’ and had in fact settled a lawsuit based on the fake accounts for millions of dollars,” says the complaint. “Musk had repeatedly tweeted about this issue on Twitter, before making his bid to acquire Twitter with full knowledge of the bots.”
The lawsuit alleges, as many people observed at the time, that Musk was likely trying to get a discount by casting doubt on his engagement and disparaging the company. Since announcing Musk’s initial commitment to buy the company, tech stocks — including Tesla, which accounts for the vast majority of Musk’s wealth — have plunged.
Following Musk’s comments, Twitter shares also fell significantly, a phenomenon the suit says is “highly unusual” given the company’s agreed-upon buyout price.
While Musk claimed the deal was on hold, there was no formal mechanism in place to back up that claim. Even within Twitter, business leaders encouraged employees to act as if nothing had changed, noting that there was “nothing like” casually suspending a binding agreement to buy the company. business.
The lawsuit also alleges that Musk deliberately delayed filing a disclosure form when his stake in the company exceeded 5%, allowing him to continue buying shares at a discount. After the form was filed and Musk’s purchases went public, Twitter shares soared nearly a third.
“Musk’s disregard for securities laws shows how one can flaunt the law and the tax code to build one’s wealth at the expense of other Americans,” the lawsuit states.