by Barbara Ortute | The Associated Press
Twitter shareholders have filed a lawsuit accusing Elon Musk of engaging in “unlawful conduct” aimed at raising doubts about his bid to buy the social media company.
The lawsuit, filed late Wednesday in US District Court for the Northern District of California, claims the billionaire Tesla CEO sought to slash Twitter’s share price because he wanted to walk away from the deal or buy significantly less. Would like to negotiate the price.
San Francisco-based Twitter has also been named as a defendant in the lawsuit, which seeks class action status as well as compensation for damages.
A representative for Musk did not immediately respond to a message asking for comment on Thursday. Twitter declined to comment.
Musk last month offered to buy Twitter for $44 billion, but later said the deal could not go ahead until the company reported how many accounts on the platform were spam or bots.
However, the lawsuit notes that Musk waived due diligence for his “take it or leave it” offer to buy Twitter. This means that he waived his right to look into the non-public finances of the company.
Also, the problem of bots and fake accounts on Twitter is not new. The company paid $809.5 million last year to settle claims it exceeded its growth rate and monthly user figures. Twitter has also disclosed its bot estimates to the Securities and Exchange Commission over the years, while also warning that its estimates may be too low.
To fund some acquisitions, Musk is selling Tesla stock and shares of the electric car maker have lost nearly a third of their value since the deal was announced on April 25.
In response to the falling value of Tesla shares, Twitter shareholders’ lawsuit claims Musk is defaming Twitter, violating both the non-disclosure and non-disclosure clauses of his contract with the company.
According to the lawsuit, “In doing so, Musk hoped to drive down Twitter’s share price and then used this as an excuse to attempt to renegotiate the buyout.”
Twitter shares closed Thursday at $39.54, 27% less than Musk’s $54.20 offer price.
Before announcing his bid to buy Twitter, Musk revealed in early April that he had bought a 9% stake in the company. But the lawsuit says that Musk did not disclose the stake within the time frame required by the Securities and Exchange Commission.
And the lawsuit says that his final disclosure of the stake to the SEC was “false and misleading” because he used a form intended for “passive investors”—which Musk was not at the time, as he was offered a position on Twitter’s board. and was interested in buying the company.
The lawsuit claims that Musk profited more than $156 million from failure to disclose his increased stake in a timely manner, as Twitter’s stock price could have been higher had investors known Musk was increasing his holdings. , the lawsuit claims.
“By delaying the disclosure of his stake in Twitter, Musk manipulated the market and bought Twitter stock at an artificially low price,” the lawsuit states.