Elon Musk missed a deadline, and now he’s being sued.
On Tuesday evening, Twitter shareholder Marc Bain Rasella filed a lawsuit accusing the Tesla CEO of hurting investors who sold Twitter shares by disclosing his stake in the company later than he was supposed to.
The lawsuit claims that Musk should have disclosed his stake in Twitter on March 24, or 10 days after his stake in the company surpassed 5%, as required by federal regulations.
Musk instead declared a 9.2% stake in Twitter on April 4. Twitter shares surged by almost 27% after Musk made his disclosure.
The lawsuit claims that if Musk had disclosed his stake when he was supposed to, the increase in Twitter’s share price would have happened earlier. Twitter shareholders who sold their shares between March 24 and April 4 received less money than they would have had Musk submitted his disclosure on time, the lawsuit says.
Delaying the disclosure (and Twitter’s subsequent share price increase) allowed Musk to expand his Twitter holdings for less money, the lawsuit says. Rasella’s complaint claims Musk may have saved $143 million by buying shares at a lower price before his disclosure.
The lawsuit caps a hectic nine days for both Musk and Twitter. After Musk disclosed his stake in Twitter on April 4, CEO Parag Agrawal announced that Musk would be joining the company’s board. Then late on Sunday, Agrawal announced that Musk would not be joining the company’s board after all. Throughout the saga, Musk, now Twitter’s largest shareholder, has tweeted out several suggestions for the platform, like the need for an edit button and a tool to let users to pay for Twitter’s premium service in Dogecoin, a cryptocurrency.
Musk did not immediately respond to a tweet asking for comment. Twitter and Tesla—neither of which are defendants in the lawsuit—did not immediately respond to a request for comment.
Market manipulation?
Rasella’s lawsuit is not the first time Musk has been accused of hurting investors.
In 2018, the Tesla CEO tweeted that he was considering taking “Tesla private at $420.” The U.S. Securities and Exchange Commission sued Musk a week later, calling the tweet “false and misleading.”
In a settlement with the SEC, Musk stepped down as Tesla chairman and paid a $20 million fine. He also promised to have a Tesla lawyer review any tweet that might have a material impact on the company.
A group of Tesla shareholders sued Tesla in 2020, saying that Musk’s tweet about taking the carmaker private caused wide swings in share price. In a filing submitted in February, Musk’s lawyers claimed the content of the 2018 tweet was “entirely truthful.”
Also in February, Tesla revealed in a regulatory filing that the SEC had issued a subpoena to the carmaker in November. While the filing doesn’t elaborate on what sparked the subpoena, it came ten days after Musk tweeted a poll asking users whether he should sell Tesla shares, noted Bloomberg.
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