JAKARTA – World conglomerate Elon Musk was sued by investors Twitter Inc, who claimed that the Tesla CEO was manipulating the company's stock price downwards. This happened when the SpaceX owner made a $44 billion takeover bid for ownership of the social media platform.
Investors say Musk saved $156 million by not disclosing that he had bought more than 5% of Twitter on March 14. They asked to be certified as a class and given an unspecified amount of punishment and restitution.
They also named Twitter a defendant, arguing the company had an obligation to investigate Musk's behavior, although they did not seek damages from the social media company.
Investors said Musk continued to buy shares after that, and finally revealed in early April that he owned 9.2% of the company's stock. This is known according to a lawsuit filed on Wednesday, May 25 in San Francisco federal court.
"By delaying the disclosure of his stock on Twitter, Musk is engaging in market manipulation and buying Twitter stock at a very low price," said investors, led by Virginia resident William Heresniak.
Neither Musk nor his lawyers immediately responded to requests for comment. Twitter also declined to comment on the report.
Investors said the recent drop in Tesla's stock had put Musk's ability to finance his Twitter acquisition in "grave jeopardy" because he had pledged his stake as collateral to secure a loan he needed to buy the company.
Tesla shares traded around $713 on Thursday afternoon, down considerably from their previous value of above $1.000 in early April.
The Wall Street Journal reported earlier this month that the timing of Musk's stock disclosure has sparked an investigation by the US Securities and Exchange Commission (SEC).
The SEC requires any investor who purchases more than 5% stake in a company to disclose their holdings within 10 days of crossing the threshold.
Investors also cited public criticism by Musk of the company, including a May 13 tweet that stated the purchase was "temporarily on hold" until Twitter proved that spam bots accounted for less than 5% of its users. According to them, this is an attempt to further push Twitter's share price down and even fall.
Musk on Wednesday pledged an additional $6.25 billion in equity financing to fund his bid for Twitter, a sign he is still working to finalize a deal with Twitter.
Musk was sued earlier this month in Delaware Chancery Court by a Florida pension fund seeking to terminate the deal on the basis that several other major Twitter shareholders supported the purchase, a violation of Delaware law. The Heresniak lawsuit does not seek to stop the takeover.
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