Elon Musk sued by shareholders over delayed disclosure of Twitter stake

SpaceX and Tesla CEO Elon Musk was sued on Tuesday by Twitter Inc (TWTR.N) investors as he delayed disclosing that he had acquired a 9.2% stake in the social media company. The shareholders claimed that Musk’s actions resulted in them missing out on massive profits when Twitter shares had spiked. 

“Defendant had the obligation, ability, and opportunity to prevent the issuance of the false statements and omissions alleged herein,” read the lawsuit filed on Tuesday in New York federal court. 

“Because of his position as a 5% owner in Twitter, and access to material non-public information available to himself but not to the public, Defendant Musk knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the omissions being made were false and misleading,” it added.

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Musk began acquiring Twitter shares earlier in January. Three months down the line, he had acquired over 5% ownership stake. 

The lawsuit stated that Musk was required to inform the stakeholders within 10 days of crossing the threshold, under the Securities Exchange Act.

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Instead, he continued to collect shares of the social media company and waited until April 4, when he acquired 9.1 % of the shares, to file the necessary disclosures.

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As word of his purchase spread, Twitter’s stock skyrocketed from $39.31 on April 1 to $49.97, a growth of roughly 27%. 

The 50-year-old business tycoon has a history of publicly disregarding securities laws. Back in 2018, he settled charges from the U.S. Securities and Exchange Commission that accused him of deceiving investors by tweeting that he had managed to secure enough funds to take Tesla private.