SAN FRANCISCO (AP) — Elon Musk’s huge investment in Twitter took a new turn Tuesday with the filing of a lawsuit alleging the colorful billionaire unlawfully delayed disclosing his stake in the social media company so that he can buy more shares at lower prices.
The lawsuit filed in federal court in New York accuses Musk of violating a regulatory deadline to disclose that he had accumulated a stake of at least 5%. Instead, according to the complaint, Musk did not reveal his position on Twitter until he nearly doubled his stake to over 9%. This strategy, according to the lawsuit, hurt less wealthy investors who sold shares of the San Francisco company in the two weeks before Musk acknowledged a major stake.
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Musk’s regulatory filings show he bought just over 620,000 shares at $36.83 each on Jan. 31, then continued to accumulate more shares on nearly every trading day through April 1. Musk, best known as the CEO of electric car maker Tesla, held 73.1 million Twitter shares as of last count Monday. This represents a 9.1% stake in Twitter.
The lawsuit alleges that as of March 14, Musk’s stake in Twitter had reached a 5% threshold that required him to publicly disclose his holdings under US securities law by March 24. Musk didn’t make the required disclosure until April 4.
The revelation sent Twitter shares up 27% from their April 1 close to nearly $50 at the end of April 4 trading, depriving investors who sold shares before Musk’s unduly delayed disclosure. of the potential for significant gains, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella. Musk, meanwhile, was able to continue buying stocks that were trading at prices ranging from $37.69 to $40.96.
The lawsuit is seeking certification as a class action lawsuit representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take a year or more.
Musk has spent around $2.6 billion on Twitter stock – a fraction of his estimated $265 billion wealth, the largest individual fortune in the world. In a regulatory filing on Monday, Musk revealed he may increase his stake after walking away from a deal made last week to join Twitter’s board.
Jacob Walker, one of the attorneys who filed the lawsuit against Musk, told The Associated Press that he had not contacted the Securities and Exchange Commission about Musk’s alleged breaches in disclosing his stake on Twitter. “I guess the SEC is well aware of what he did,” Walker said.
An SEC spokesperson declined to comment.
The SEC and Musk have been feuding in court since 2018, when Musk and Tesla agreed to pay a $40 million fine to settle allegations that he used his Twitter account to mislead investors about a potential takeover of the company of electric cars that never materialized. As part of the deal, Musk was supposed to get legal approval for his tweets about information that could affect Tesla’s share price – a provision that regulators say he sometimes violated and which he says , now muzzles him unfairly.
Musk did not immediately respond to a request for comment posted to Twitter, where he often shares his opinion and thoughts. Alex Spiro, a New York lawyer representing Musk in his ongoing dispute with the SEC, also did not immediately respond to a question from The Associated Press.