A group of Twitter shareholders filed a class-action lawsuit against Tesla and SpaceX CEO Alon Musk, claiming he did not disclose his holdings on Twitter in time – which hurt investors who lost potential profits. On April 4, Musk filed a regulatory document with the U.S. Securities and Exchange Commission. -SEC), in which it was reported that Musk had acquired 9.2% of the shares of the social network Twitter (73.48 million shares) as of March 14, making it the largest shareholder in the company.This announcement led to a jump in the share price, which could lead to harm to investors.
Federal trade laws require investors who purchase more than 5% of an ordinary stock of a company to disclose their holdings to the Securities and Exchange Commission within 10 calendar days. According to the document filed with the SEC, Musk began buying Twitter shares on Jan. 31, and decided to report it on March 14 – in practice, he had to announce by March 24.
The law firm Block & Leviton has filed a class action lawsuit on behalf of several Twitter shareholders, alleging that Musk purchased additional Twitter shares at a reduced price from the moment he crossed the 5% stake threshold until the public disclosure was reported. So in fact, when he kept his holdings a secret, he kept a share price and went back to buying it at a premium, according to the plaintiff.
Musk started buying shares on Twitter on January 31, and decided to report it on March 14, and he had to announce it by March 24. “When Musk finally submitted the required 13 form, thus revealing his affiliations on Twitter, the company’s shares rose from a closing price of $ 39.91 per share on April 1, to a closing of $ 49.97 per share on April 4, an increase of about 27%,” it said. In the lawsuit.
The class action lawsuit alleges that investors lost potential profits that they could have realized if Musk had disclosed his holdings earlier. This delay actually allowed him to buy more Twitter shares at a low price and actually cheat social network stock sellers, instead of being able to make a bigger profit on it if he had reported it on time. After 10 days, it increased its ownership by more than 4%, before the jump in the share price that occurred on April 4. Capital market experts told the Washington Post that this delay may have helped Musk make $ 156 million.
Musk did not respond to worldwide reports.
Recall, after it was reported that Musk had become the largest shareholder in the company, Twitter announced that Musk would join the company’s board of directors. However, a few days later it was reported that Musk had given up his seat on the board without giving any clear unpublished reason.