Status: 04/13/2022 10:11 a.m.
Entering the short message service Twitter could have legal consequences for Tesla boss Elon Musk. A shareholder has filed a lawsuit against the multi-billionaire in federal court in New York.
Tesla CEO Elon Musk may have violated US securities regulations during his rise to become Twitter’s largest shareholder. At least that’s what he is accused of in a lawsuit filed Tuesday in federal court in New York.
Has Musk delayed a stock market response?
In it, a Twitter shareholder alleges that Musk made “false and misleading statements and omissions.” The multi-billionaire reportedly delayed posting his investment in the social media company. By doing so, he delayed a stock market reaction, which allowed him to buy more stocks at lower prices.
Indeed, the regulatory provisions in the USA are very clear: if an investor reaches the 5% threshold with his stake in a listed company, he must declare his stake within ten days.
Twitter shareholders aggrieved?
According to the lawsuit, Musk obtained a 5% stake on March 14, which required him to make his holdings public by March 24. However, this only happened on April 4. During this period, Musk further increased his stake to over nine percent.
According to the plaintiff, this strategy hurt less fortunate investors who sold their shares on Twitter in the space of nearly two weeks after Musk was slow to disclose his investment. After Musk’s Twitter entry went public on April 4, Twitter’s stock price soared.
What did the SEC know?
The lawsuit seeks unspecified damages. A class action lawsuit is now being sought to represent all Twitter shareholders who sold shares between March 24 and April 4.
Jacob Walker, one of the attorneys who filed the lawsuit against Musk, told the AP he had not contacted the Securities and Exchange Commission about Musk’s alleged violations. “I guess the SEC is aware of what he did,” he said. The SEC initially declined to comment.
Elon Musk’s long history on Twitter SEC
Still, it wouldn’t be the first time the Tesla boss hasn’t taken it so seriously with stock market regulation. In any case, Elon Musk has already gotten himself into a lot of legal trouble with his activities on Twitter. It was only recently that the Tesla boss upset the United States Securities and Exchange Commission with his poll of Twitter users on whether to sell Tesla stock.
In 2018, Tesla and Musk settled a dispute with the SEC over a tweet, each paying a $20 million fine. Additionally, Musk had to step down as CEO of Tesla at the time. The tweet was about a possible Tesla delisting from the stock market.