A Twitter Inc. shareholder is suing Elon Musk, claiming he and others suffered financial losses because of the billionaire’s delay in disclosing his stake in the social-media company.
In a lawsuit filed Tuesday in the Southern District of New York, Marc Bain Rasella claims Musk made “materially false and misleading statements and omissions by failing to disclose to investors” his 9.2% ownership stake in a timely manner, in violation of Securities and Exchange Commission regulations.
Rasella said he suffered losses by selling Twitter
stock at “artificially deflated prices” after Musk bought his shares but before they were publicly disclosed. The suit claims that by delaying his disclosure, Musk was able to buy more Twitter shares at a discount.
The lawsuit claims Musk started his Twitter buying spree in January and reached a 5% stake — a level that requires SEC disclosure — in March. Musk, the chief executive of Tesla Inc.
and SpaceX and the world’s wealthiest individual, did not make his stake known until April 4.
Rasella is seeking class-action status for his suit on behalf of Twitter investors who sold their stock between March 24 and April 4.
“Plaintiff and the class would not have sold Twitter’s securities at the price sold, or at all, if they had been aware that the market prices had been artificially and falsely deflated by defendant’s misleading statements,” the lawsuit said.
News of Musk’s stake sent Twitter shares soaring a record 27% on April 4. Twitter shares have retreated about 13% over the past five trading days.
Last week, Twitter said it Musk would join its board of directors, a move that would limit his potential ownership stake, but CEO Parag Agrawal said late Sunday that Musk would not be joining the board after all. Musk spent much of last weekend tweeting suggestions, criticisms and juvenile jokes about Twitter — some of which he later deleted.
Twitter shares are up about 3% year to date, but down 39% over the past 12 months, compared to the S&P 500’s
8% loss this year and 6% gain over the past year.