August 11, 2022

Elon Musk‘s battle with Twitter’s board continues.

The platform’s shareholder has sued the SpaceX founder, alleging that by not disclosing his stake in the social media company soon enough, Musk kept Twitter’s share price down.

Marc Bain Rasella filed the lawsuit against Musk for alleged securities fraud in Manhattan federal court on Tuesday, according to a Bloomberg report. 

The suit alleges that Musk was required to disclose his stake in Twitter by March 24, but he did not until April 4.

Twitter shares rose 27% on April 4, to $49.97 from $39.31, after Musk disclosed his stake, which investors viewed as a vote of confidence from the world’s richest person in Twitter.

Former shareholders led by Marc Rasella said the delayed disclosure let Musk purchase more Twitter shares at lower prices while defrauding them into selling at “artificially deflated” prices. The lawsuit seeks unspecified compensatory and punitive damages.

Twitter’s stock price rose 27 percent following Elon Musk’s disclosure of his stake in the company.
Getty Images

The lawsuit is seeking to be certified as a class action representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take at least a year.

It’s the latest development in a dramatic saga that has unfolded since Musk went public about his 9.1% stake in Twitter.

Musk spent about $2.6 billion on Twitter stock – a tiny fraction of his estimated net worth of $272 billion.

It comes as Musk reversed his decision to join Twitter’s board of directors after disclosing he owns more than 9% of the social media company, Twitter CEO Parag Agrawal said.

The Tesla founder’s appointment to the board was to become official on Saturday pending a background check and formal acceptance, “but Elon shared that same morning that he will no longer be joining the board,” Agrawal wrote in a brief message to the company that he tweeted on Sunday.

“The Board and I had many discussions about Elon joining the board, and with Elon directly. We were excited to collaborate and clear about the risks. We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward,” he said.

Elon Musk
Elon Musk has a 9.1 percent stake in Twitter.
SOPA Images/LightRocket via Gett

“I believe this is for the best,” Agrawal wrote. “We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input.”

See also  Ukrainian military warns ‘Ghost of Kyiv’ is ‘coming for Russia’s soul’