Musk sued for ‘manipulating’ Twitter takeover bid
Image credit: REUTERS/Dado Ruvic/Illustration
Twitter shareholders have filed a lawsuit accusing the Tesla CEO of actively manipulating the company’s stock for personal gain, stating that Elon Musk's tweets about his purchase of the company constitute “unlawful conduct".
More unknowns continue to circle Elon Musk’s purchase of Twitter.
A lawsuit filed in the US District Court for the Northern District of California claims the Tesla CEO has attempted to drive down Twitter's stock price by expressing doubts over his decision to buy the company. The shareholders claim Musk wants to pressure Twitter to negotiate a substantially lower purchase price.
The lawsuit seeks class-action status as well as compensation for damages.
This is only the latest row in Musk’s journey to buy Twitter. The billionaire made an offer last month to purchase the company for $44bn (£35bn). However, he later backed down from the deal, stating that the acquisition could not go forward until the company provided information about how many accounts on the platform are spam or bots.
The lawsuit notes, however, that Musk waived due diligence for his “take it or leave it” offer to buy Twitter, waiving his right to look at the company’s non-public finances.
Moreover, the problem of bots and fake accounts on Twitter is nothing new. Only last year, the company paid $809.5m (£641m) to settle claims it was overstating its growth rate and monthly user figures. Twitter has warned that its estimate might be too low in its disclosures of bot estimates to the Securities and Exchange Commission (SEC).
In addition, questions are increasingly arising about how Musk planned to finance the purchase. Although the billionaire originally announced that he had raised $7.1bn (£5.6bn) from a group of A-list investors, the remaining $27.3bn (£21.6bn) of the equity commitment he made to Twitter’s board remains unaccounted for.
To fund some of the acquisition, Musk has been selling Tesla stock, and shares in the electric carmaker have lost nearly a third of their value since the deal was announced on 25 April. In response to this situation, the Twitter shareholders’ lawsuit claims Musk has been denigrating Twitter, violating both the non-disparagement and non-disclosure clauses of his contract with the company.
“In doing so, Musk hoped to drive down Twitter’s stock price and then use that as a pretext to attempt to renegotiate the buyout,” the lawsuit claimed.
Twitter’s shares closed Thursday at $39.54 (£31.36), 27 per cent below Musk’s $54.20 (£42.20) offer price.
Before announcing his bid to buy Twitter, Musk disclosed in early April that he had bought a 9 per cent stake in the company. But the lawsuit says Musk did not disclose the stake within the timeframe required by the SEC and, when he did it, the disclosure was “false and misleading” because he used a form meant for “passive investors” — which Musk was not.
“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” the lawsuit says
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