Photo: Rafael Henrique/SOPA Images/LightRocket via Getty Images
A Twitter shareholder is suing Elon Musk, Twitter's largest individual shareholder and the world's richest man, for allegedly making "materially false and misleading statements and omissions by failing to disclose to investors" his ownership stake in the social media company.
Why it matters: By failing to disclose his ownership stake within the time period required by the U.S. Securities and Exchange Commission (SEC), Musk was able to acquire Twitter shares less expensively, Marc Bain Rasella alleges in the federal securities class action lawsuit.
What they're saying: The complaint claims that Musk began acquiring Twitter shares in January. By March 14, he had attained more than a 5% ownership stake in the company.
- According to SEC rules, Musk should have reported his ownership to the SEC within 10 days of exceeding the 5% ownership threshold, but he didn't and instead continued to amass shares.
- He finally filed on April 4 after acquiring a 9.2% stake in Twitter, but investors who sold their shares between March 24 and April 4 "missed the resulting share price increase as the market reacted to Musk's purchases and were damaged thereby," the complaint alleges.
- Rasella allegedly sold shares at "artificially deflated prices" during that time period, and "has been damaged by the revelation of the Musk's material misrepresentations and material omissions."
- Both Rasella's legal team and Twitter declined to comment.
- A spokesperson for Musk didn’t immediately reply to Axios' request for comment.
Worth noting: The class-action suit is brought on behalf of all investors who sold Twitter shares between March 24 and April 4. Rasella has demanded a trial by jury.
The big picture: Twitter announced last week that Musk would join its board of directors, but Musk has since decided against the move.
- Concern remains that Musk, who has criticized Twitter for "failing to adhere to free speech principles," can reform the platform to his liking, Axios' Hope King reports.
Editor's note: This story has been updated with more details about the lawsuit.