Elon Musk and Twitter Face Shareholder Class Action Lawsuit Over ‘Harmful’ Deal
A Twitter shareholder has filed a class action lawsuit on behalf of all stockholders against Elon Musk and Twitter on May 25, alleging they have been harmed by their actions — and that they violated California laws — in connection with Musk’s proposed buyout of Twitter, according to the lawsuit.
The suit alleges, in part, that because Tesla’s stock is worth much less now than when Musk agreed to buy Twitter, Musk is at risk of a margin call or a requirement to put up more cash.
“Musk quickly acted to attempt to mitigate these personal risks to himself by engaging in unlawful conduct that moved the price of Twitter’s stock down. Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or re-negotiate the buyout price by as much as 25% which, if accomplished, would result in an $11 billion reduction in the Buyout consideration,” the filing reads, in part.
The suit claims that Musk’s “market manipulation worked,” as Twitter has lost $8 billion in valuation since the deal was announced — and that Musk also enriched himself by approximately $156 million in failing to timely file disclosure of his stake in Twitter.
In addition, in regards to Musk’s tweet about the deal being “on hold,” the suit alleges that it was misleading and constituted an effort to manipulate the market for Twitter shares “as he knew all about the fake accounts.”
“Musk’s wrongful conduct has not only substantially harmed Twitter’s shareholders by causing Twitter’s stock to crater by approximately 25% but it has also substantially harmed Twitter’s employees,” the suit claims.
The suit came the same day Elon Musk said he had increased his equity commitment — adding an additional $6.25 billion toward the $44 billion Twitter deal, as GOBankingRates previously reported. The move, which comes amid intense pressure on Tesla’s stock, increases the commitment to $33.5 billion. The Securities and Exchange Commission (SEC) filing also notes that Musk is in talks with Jack Dorsey about additional financing.
Shares of Twitter are down 18.7% over the past month, and were mostly flat in pre-market trading May 27.
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