Barbara Ortutay, The Associated Press Published Thursday, May 26, 2022 at 7:40 PM EDT
Twitter shareholders have filed a lawsuit accusing Elon Musk of engaging in “illegal conduct” in a bid to cast doubt on his bid to buy the social media company.
The lawsuit filed Wednesday afternoon in the U.S. District Court for the Northern District of California claims that the billionaire CEO of Tesla has tried to reduce the price of Twitter shares because he wants to move away from the deal or negotiate a price substantially lower purchase.
San Francisco-based Twitter is also designated as the defendant in the lawsuit, which seeks class action status as well as damages.
A Musk representative did not immediately respond to a message for comment Thursday. Twitter declined to comment.
Last month, Musk offered to buy Twitter for $ 44 billion, but later said the deal could not go ahead until the company provided information on how many accounts on the platform are spam or robots.
The lawsuit alleges, however, that Musk waived due diligence for his offer to “take it or leave it” to buy Twitter. This means that he waived his right to look at the company’s non-public finances.
Also, the problem of bots and fake Twitter accounts is nothing new. The company paid $ 809.5 million last year to resolve claims that exaggerated its growth rate and monthly user figures. Twitter has also revealed its bot estimates to the Securities and Exchange Commission for years, while warning that its estimate could be too low.
To finance part of the acquisition, Musk has been selling shares of Tesla and the 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 fall in the value of Tesla shares, Twitter shareholder lawsuits allege that Musk has been denigrating Twitter, violating both the non-contempt and non-disclosure clauses of his contract with the company.
“In doing so, Musk hoped to lower the price of Twitter shares and then use it as a pretext to try to renegotiate the purchase,” according to the lawsuit.
Shares of Twitter closed at $ 39.54 on Thursday, 27 percent below Musk’s $ 54.20 bid price.
Before announcing his offer to buy Twitter, Musk revealed in early April that he had bought a 9% stake in the company. But the lawsuit says Musk did not disclose participation within the time limit required by the Stock and Securities Commission.
And the lawsuit says his eventual disclosure of SEC involvement was “false and misleading” because he used a form for “passive investors,” which Musk was not at the time, because he had been offered a position at the SEC. Twitter board and was interested in buying the company.
Musk benefited from more than $ 156 million by not revealing its increased stake in time, as the price of Twitter shares could have been higher if investors had known that Musk was increasing its holdings, he says. the demand.
“By delaying the disclosure of his stake in Twitter, Musk engaged in market manipulation and bought shares of Twitter at an artificially low price,” the lawsuit says.