Elon Musk Sued by Twitter Investors for Alleged Stock Price Manipulation
Tesla owner Elon Musk was sued for delaying the disclosure of his stake in the company.
A lawsuit has been filed against Tesla CEO Elon Musk by Twitter investors, accusing him of attempting to artificially reduce the company's stock price.
According to the complainants, Musk posted tweets and made statements intended to create doubt about the $44 billion deal and create room for negotiating a discount or backing out of it entirely.
“After first agreeing to buy Twitter for $54.20 per share on 25 April 2022, Musk began denigrating Twitter and then trying to renegotiate the deal,” says the law firm Cotchett, Pitre & McCarthy, which filed the suit.
"Musk’s false statements and tweets have resulted in an $8 billion loss of market capitalisation for Twitter shareholders, who are forced to go along for the ride and games."Cotchett, Pitre & McCarthy
Two weeks ago, Musk said he was putting the deal "temporarily on hold" until Twitter shows proof that bots and spam accounts constitute less than five percent of its daily average users.
"My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of (fake accounts being) fewer than 5 percent. This deal cannot move forward until he does," he wrote.
'Musk Was Aware of Bots, Waived Due Diligence'
The lawsuit, filed by twitter investor William Heresniak, says that Musk inked the deal in April without carrying out due diligence.
It alleges that the time, Musk was well aware that Twitter had "a certain amount of fake accounts and accounts controlled by bots" and that the company had settled a fake-accounts lawsuit for over $800 million last year.
Musk's tweets also didn't line up with the fact that there is nothing in the buyout contract that allows Musk to put the deal “temporarily on hold," the lawsuit says.
It alleges that Musk, through his comments and conduct, hoped to re-negotiate the buyout price by as much as 25 percent which, if accomplished, would result in an $11 billion reduction in the Buyout consideration.
"Musk's disregard for securities laws demonstrates how one can flaunt the law and the tax code to build their wealth at the expense of the other Americans," the filing said.
In a relief for both Tesla and Twitter shareholders, Elon Musk has committed to provide an additional $6.25 billion in equity financing for his $44 billion Twitter takeover, instead of a series of margin loans against Tesla stock.
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