Lawsuit: Musk saved $143 million by illegally waiting to reveal his stake on Twitter

Elon Musk is facing a shareholder lawsuit for failing to disclose his Twitter investment until 11 days after the deadline set by federal law.

The lawsuit said Musk began buying Twitter shares in January and had acquired more than 5 percent of all shares by March 14. Under US law, “Musk is required to file Schedule 13 with the Securities and Exchange Commission within 10 days of exceeding Twitter’s 5 percent ownership limit, or March 24, 2022,” complaint Presented yesterday in US District Court for the Southern District of New York.

Twitter stock rose 27 percent on April 4 when Musk revealed his 9.2 percent stake. The class action complaint said this meant that investors who sold before April 4 lost gains and that Musk was able to continue buying shares at artificially low prices:

Investors who sold Twitter shares between March 24, 2022, when Musk should have disclosed his Twitter ownership, and prior to the actual disclosure on April 4, 2022, missed the resulting increase in the share price as the market reacted to Musk’s purchases and was hurt as a result.

Musk’s motive was to delay his filing in Schedule 13. By not disclosing his ownership stake via Schedule 13, Musk was able to acquire Twitter shares at a lower cost during the term. As a result of the foregoing, throughout the term of the term, Defendant Musk made false and materially misleading statements by failing to disclose to investors that he had acquired a 5% ownership interest in Twitter as required under Section 13(d) of the Exchange Act and SEC Act ( SEC Rule 13d-1) issued thereunder, 17 CFR § 240.13d-1.

Washington Post mentioned Last week, Musk’s disclosure of his stake on Twitter was delayed by 11 days and that “the omission may have earned him $156 million.” The shareholder lawsuit estimates that figure at $143 million. Musk did not explain the reason for his delay.

Musk’s windfall may come as a slap in the wrist in the form of a SEC fine, but it will likely be limited to hundreds of thousands of dollars, according to legal and security experts, the Washington Post wrote. Musk’s Twitter stock is worth more than $3 billion.

The lawsuit: Musk caused investors to miscalculate the value of shares

The lawsuit was filed by Twitter investor Marc Bain Rasella, who said he “sold Twitter shares at artificially discounted prices during the term” and was hurt because Musk’s “material misrepresentations and material omissions” would “induce a reasonable investor to misjudge the value” of Twitter shares.

Rasella filed the suit on behalf of all investors who sold Twitter shares between March 24 and April 1, 2022, except for Musk himself, his family and his affiliates, who were excluded from the proposed category. The suit asks for class action status and an unspecified amount of “punitive damages.”

“The plaintiff and class would not have sold Twitter’s securities at the sold price, or at all, if they had known that market prices had been artificially and erroneously lowered through defendant’s misleading statements,” the complaint said. The lawsuit alleges that “Defendant Musk knew or recklessly ignored his obligation to file a schedule 13G/D disclosure of his ownership interest in Twitter. Furthermore, Defendant Musk saved approximately $143 million on his Twitter purchases by delaying the filing of the requested application. Scheduling 13G/D and buying additional shares at discounted rates.”

After Musk revealed his investment, Twitter announce That he agreed to join the board of directors in a deal that would prevent him from buying more than 14.9 percent of the company’s shares. musk Undo the deal before it is completed. Analysts have speculated that Musk may buy more shares and take a “hostile” attitude toward Twitter.