A lawsuit has been filed against billionaire Elon Musk in a New York federal court accusing Musk of violating a regulatory deadline in which he would reveal he had accumulated a stake of at least five percent in the social media company Twitter.
The complaint, filed by an investor in Twitter named Marc Bain Rasella, alleges that Musk did not expose his position in Twitter until he increased his stake to nine percent in the company. By doing this, it is alleged that Musk negatively affected investors who do not have as much money as he does and sold shares that they had in Twitter about two weeks before Musk acknowledged that he was holding a major stake in the San Francisco-based company. Musk’s regulatory filings reveal that he purchased a little over 620,000 shares at a price of $36.83 each on January 31st and bought more shares every single day after that through April 1. At the time of the filing of the complaint, Musk was holding 73.1 million shares in Twitter, which represents a 9.1 percent stake in the company.
The complaint also states that as of March 14, Musk’s number of shares in Twitter had reached the five percent threshold that then required him to disclose his number of holdings publicly. This requirement falls under the United States security law and Musk should have made his purchase of the shares public by March 24 but did not make the required disclosure on time by waiting until April 4. When it was revealed that Musk had bought a large amount of stock in Twitter, the value of Twitter’s stock rose by 27 percent, valuing the stock at $50 per share, but by concealing the number of stocks he was purchasing, Musk was able to purchase his shares at $37.69 to $40.96.
Rasella seeks to have his lawsuit certified as a class-action lawsuit which will include Twitter shareholders who sold their shares in Twitter between March 24 and April 4.
It is estimated that Musk has a total wealth of about $265 billion. He spent $2.6 billion on Twitter stocks.