Elon Musk sued by ex-Twitter shareholders for failing to disclose stake in firm

Tesla's chief executive Elon Musk is getting sued by former Twitter shareholders for failing to disclose his stake in the company at the time of required action. According to the lawsuit seen by MARKETING-INTERACTIVE, the lawsuit stated that Musk did not disclose his 9.2% stake until 4 April. When he finally did, the company's shares rose from a closing price of US$39.31 per share on 1 April to close at US$49.97 per share on 4 April, an increase of about 27%.

As a result, investors who sold shares of Twitter stock between 24 March, when Musk was required to have disclosed his Twitter ownership, and before the actual 4 April disclosure, missed the resulting share price increase as the market reacted to Musk's purchases. By failing to disclose his ownership stake, the lawsuit alleged that Musk was able to acquire shares of Twitter less expensively during the class period.

This comes shortly after news broke that Musk won't be joining Twitter's board of directors after all. Twitter CEO Parag Agrawal tweeted on 5 April that the company is appointing Musk to its board after the latter's stake in the company was revealed. Musk is currently the company’s biggest shareholder, according to media outlets including Channel NewsAsia, CNBC, The Straits Times, and SCMP.

On 11 April, Agrawal shared on Twitter that he had many discussions with the board about Musk joining, as well as with Musk directly. Musk's appointment to the board became officially effective on 9 April but Musk shared that same morning that he will no longer be joining.

"I believe this is for the best. We have and will always value input from our shareholders whether they are on our board or not. Musk is our biggest shareholder and we will remain open to his input," Agrawal said. 

https://twitter.com/paraga/status/1513354622466867201

Musk’s appointment to Twitter’s board of directors was met with significant global buzz in anticipation of what Musk would bring to Twitter should he join. Musk’s tweets, in particular, have been the subject of many-a-conversation, such as him asking his some 81 million followers if Twitter was dying, the same day it was revealed that he would not be joining the board.

Other tweets by Musk that have been brought to attention included one which was posted on 5 April where he said "Oh hi lol" following the announcement of his ownership stake. On 7 April, he also tweeted and posted a meme about the next Twitter board meeting being "lit". At the same time, Musk also reportedly deleted some tweets containing criticisms and jokes about Twitter, The Wall Street Journal said.

Additionally, The New York Times reported that Musk’s investment push is the second time in two years that Twitter has dealt with an activist investor. In 2020, the investment firm Elliot Management accumulated a 4% stake and used its position to press for changes within the company, NYT said.

Photo courtesy: 123RF

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