Tesla’s boss currently controls more than 9% of Twitter, making him the single largest shareholder of the company
Former Twitter shareholders have sued Elon Musk over the delay in revealing his 9.2% stake in the social media company.
According to the shareholders, Musk’s delay caused them to miss out on potential profits after Twitter’s stock price rallied following his revelation.
The class-action suit was filed in Manhattan federal court by former shareholders led by Marc Rasella. According to the shareholders, the Tesla CEO made materially false and misleading statements and omissions by not revealing that he had invested in Twitter since March 24 as required under federal law.
Musk made his investment in Twitter known on April 4, leading to a 27% rally in the company’s stock price. The investors believe that the investment in Twitter is a vote of confidence from the world’s richest person.
According to the former shareholders, the delayed disclosure let Musk buy more Twitter shares at lower prices, while they were tricked into selling their shares at rtificially deflated prices.
At the moment, the class-action suit seeks unspecified compensatory and punitive damages. The lawsuit mentions Elon Musk as the defendant, not his company, Tesla.
The social media giant announced last week that Musk would be joining the company’s board. However, Elon Musk reversed this decision and decided against joining Twitter’s board.
His decision to withdraw from joining Twitter’s board could be because he is interested in making further investments in Twitter.
By joining the board, Musk couldn’t hold than a 14.9% stake in the company’s common stock outstanding, including through derivative securities, swaps, or hedging transactions.
However, by not joining the board, Musk can increase his stake in the company beyond the current 9%.
According to Forbes Magazine, Elon Musk is currently the world’s richest person, with a net worth of roughly $265 billion.