Elon Musk sued by Twitter shareholder for failing to disclose stake on timeLeigh Mc Gowranon April 13, 2022 at 08:32 Silicon RepublicSilicon Republic

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Elon Musk is being sued by a Twitter shareholder for failing to properly disclose his ownership stake in the company, which allegedly kept company share prices low.

According to the lawsuit shared by Protocol yesterday (12 April), Musk was required by federal law to notify the US Securities and Exchange Commission (SEC) that he passed the 5pc ownership of Twitter by 24 March. The Tesla CEO had been acquiring shares since January and acquired 5pc by 14 March.

However, the document states that Musk continued to amass shares before notifying the SEC. Musk made it public on 4 April that he acquired shares in the social media company, by which time he had acquired more than 9pc of Twitter’s shares.

This made Musk one of the company’s largest shareholders, with a greater stake than company founder Jack Dorsey. It was reported that shares went up more than 25pc after the news became public.

The lawsuit claims that investors who sold shares during the period when Musk was supposed to reveal his stake missed the share price increase from the market reaction “and were damaged thereby”.

“By failing to disclose his ownership stake via Schedule 13, Musk was able to acquire shares of Twitter less expensively during the Class period,” the lawsuit said.

There has been confusion regarding Musk’s future involvement with Twitter over the past couple of weeks. On 5 April it was stated Musk would be joining the board of directors with plans to bring “significant improvements” to the social media platform.

However, Twitter’s CEO Parag Agrawal shared a memo on 11 April that Musk chose not to join the board. According to a document shared by Axios, Musk would have been limited to a maximum stake of 14.9pc in the company if he became a board member.

On 25 March, after Musk had acquired a 5pc stake in the company, Musk asked his social media followers in a tweet whether Twitter “rigorously adheres” to the principle of free speech.

“Given that Twitter serves as the de-facto public town square, failing to adhere to free speech principles fundamentally undermines democracy,” he added in a follow-up tweet. “What should be done?”

He then asked followers whether a new social media platform was needed, and said he was giving “serious thought” to building one.

Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy.

What should be done? https://t.co/aPS9ycji37

— Elon Musk (@elonmusk) March 26, 2022

Musk has more than 80m followers on Twitter and regularly takes to the platform to make company announcements, such as Tesla’s move away from bitcoin and its move to Texas.

However, some of his tweets have also gotten him into hot water.

In 2018, Musk tweeted that there was “funding secured” to take Tesla private at $420 a share, but the SEC found his series of tweets to be “false and misleading”. This led to a settlement, fines and Musk stepping down as chair of the company.

Elon Musk at a Tesla shareholders meeting in 2016. Image: Steve Jurvetson via Flickr (CC by 2.0)

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