On April 5, Twitter made the announcement that Musk would join the board of directors, but then turned around and decided not to do so after all. According to Reuters, the shareholders claim that the billionaire took too long to reveal his 9.2 percent stake in the company, which caused them to miss the increase in stock price.
In the lawsuit filed in federal court in Manhattan, the shareholders claim that Musk made “materially false and misleading statements and omissions,” by failing to publicly acknowledge his stake in the company by March 24, which was the cut off date required by law. U.S. securities law requires that investors must announce within 10 days when they have acquired 5 percent or more of a company.
Reuters mentions, “Twitter shares rose 27% on April 4, to $49.97 from $39.31, after Musk disclosed his stake, which investors viewed as a vote of confidence from the world’s richest person in San Francisco-based Twitter.” To sum up what Marc Rasella, a former shareholder, said, Musk purchased shares at low prices while the other shareholders sold their shares for even lower prices.
The lawsuit seeks unspecified compensatory and punitive damages. A lawyer for Musk had no immediate comment.
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