Disgruntled shareholders are now suing both Twitter and Elon Musk, over volatile share price swings during the chaotic takeover attempt
Elon Musk’s bid for Twitter has played havoc with Twitter’s (and indeed Tesla’s) share price of late, but now disgruntled shareholders are suing, alleging stock market manipulation.
But it is fair to say that since Musk first announced his shareholding, followed by his intention to buy Twitter itself, the share price of the social platform has been subjected to big rises, followed by big falls.
When Musk first disclosed he had acquired a 9.2 percent stake in Twitter in early April, Twitter’s share price rose 25 percent up to $49.32 on Nasdaq.
But since Musk’s acquisition bid has progressed, Twitter’s share price has actually dropped more than 12 percent.
Twitter’s share price meanwhile is currently trading at $39.52 as of Friday midday.
Meanwhile Tesla’s share price is down more than 40 percent at the end of trading Wednesday since Musk first revealed his stake in Twitter.
These volatile share price swings have led disgruntled Twitter shareholders to sue both Elon Musk and Twitter over the chaotic acquisition process.
According to CNBC, in the proposed class-action lawsuit filed on Wednesday in a California Northern District Court, Twitter shareholders allege that Musk violated California corporate laws on several fronts, and in doing so engaged in alleged market manipulation.
In one potential violation, the shareholders claim that Musk financially benefited by delaying required disclosures about his stake in Twitter and by temporarily concealing his plan in early April to become a board member at the social network.
It should be noted that this is not the only lawsuit Musk is facing over his late share disclosure.
In April Marc Bain Rasella filed the lawsuit against Musk for alleged securities fraud in Manhattan federal court for failing to disclose his substantial Twitter stake in a timely manner, which impacted platform’s share price
Meanwhile this week’s lawsuit also alleges that Musk snapped up shares in Twitter while he knew insider information about the company based on private conversations with board members and executives, including former CEO Jack Dorsey, a longtime friend of Musk’s, and Silver Lake co-CEO Egon Durban, a Twitter board member whose firm had previously invested in Musk’s SolarCity before Tesla acquired it.
Musk suffered a blow this week when Twitter shareholders voted not to re-elect Egon Durban, back to the platform’s board of directors.
The proposed lawsuit also contends that Musk broke California laws by sowing doubt about whether he would complete the deal after signing the contract to buy it.
The shareholders’ complaint alleged that Musk’s complaint about “bots” and “fake accounts” are part of a scheme to negotiate a better price – or to kill the deal altogether.
“Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or 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,” CNBC reported the complaint as stating.
According to California law, corporations in the state have to exclude board members from voting on proposals if they have engaged in some kind of misconduct relevant or connected to those proposals.
Twitter declined to comment, CNBC reported, and Musk did not return requests for comment.