Elon Musk Sued By Twitter Shareholders For Manipulating Company’s Stock

Angie May 26, 2022 News Leave a comment

It looks like Elon Musk is in a bit of legal trouble with Twitter. The social media company’s shareholders are suing Musk for making false and disparaging statements about the company to lower its stock value.

The lawsuit was filed in federal district court in San Francisco on Wednesday night, alleging that the Tesla CEO has actively manipulated the company’s stock for personal gain.

The Tesla and SpaceX CEO revealed a significant stake in Twitter on April 4 and 10 days later proposed a buyout for $44 billion. Since Musk’s acquisition bid, Twitter’s share price has dropped more than 12%, and Tesla’s is down about 28% as part of a broad sell-off in tech stocks. Tesla shares were off more than 40% at the end of trading Wednesday since Musk first revealed his stake.

The complaint focuses on Musk’s conduct since signing the purchase agreement with Twitter’s board on April 25th, particularly his recent statement that the deal “cannot move forward” without more information about automated accounts on the platform.

After signing the agreement, the complaint alleges, “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 re-negotiate the buyout price.”

The lawsuit is a proposed class action brought by a small group of shareholders who are seeking damages that would be distributed among anyone holding the company’s stock.

The lawsuit also claims that Musk broke California laws by sharing his doubt about whether he would complete the deal after signing the contract to buy it.

Earlier this month, Musk said he was putting the Twitter acquisition “on hold” to learn more about “inauthentic” activity on the platform, including information about fake or automated accounts.

“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%, which, if accomplished, would result in $11 billion reduction in the Buyout consideration,” the complaint said.

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

Primarily, the suit accuses Musk of acting unlawfully to mitigate financial risk to himself as Twitter’s stock price dipped following his attempts to buy Twitter.

Twitter has yet to comment on the matter. Elon Musk or his representative have not responded to these recent claims.