A group of Twitter shareholders is suing Elon Musk for allegedly failing to disclose his significant stake in Twitter in an appropriate timeframe. The class action lawsuit against Musk alleges that he delayed a mandatory SEC filing as a major investor so he could purchase even more shares. The stock jumped 27 percent when Musk eventually did disclose his position, leaving investors who sold shares feeling left out in the cold.
CNBC reports that a group of Twitter shareholders is suing Tesla CEO Elon Musk for allegedly failing to disclose his recent purchase of a significant state in Twitter in the appropriate timeframe. Musk revealed on April 4 that he had purchased a 9.2 percent stake in Twitter, but some shareholders claim his disclosure was made too late.
According to federal law, investors must inform the Securities and Exchange Commission (SEC) within 10 days of purchasing more than five percent of the shares in a publicly traded company. Musk allegedly began purchasing stock in January and would have hit this milestone on March 14, and should have informed the SEC by March 24 but may have failed to do so.
A lawsuit was filed on Tuesday in New York by the law firm Block & Leviton on behalf of a group of Twitter shareholders who are alleging that Musk was able to purchase more Twitter stock at a lowered price in the period between passing the five percent ownership threshold and publicly announcing his stake in the company.
According to a number of legal and securities experts questioned by the Washington Post, the delay could have helped Musk gain $156 million. Twitter’s stock jumped by 27 percent on April 4 after Musk disclosed his 9.2 percent stake, worth almost $3 billion.
Alon Kapen, a corporate transaction lawyer with Farrell Fritz, said in a statement shared with CNBC: “What seems crystal clear is that Elon Musk missed the applicable 10-day filing deadline under Sections 13(d) and 13(g) of the Securities Act of 1933 to report 5% ownership in a public company.”
Kapen added: “That gave him an extra 10 days in which to buy additional shares (he increased his ownership during that time by an extra 4.1%) before the per share price spike that occurred when he finally announced his holdings on April 4.”
Read more at CNBC here.