Barbara Ortutai, Associated Press, Published on Thursday, May 26, 2022, 7:40 PM EDT
Twitter shareholders have filed a lawsuit accusing Elon Musk of “illegal behavior” aimed at casting doubt on his offer to buy the social media company.
The lawsuit, filed late Wednesday in the U.S. District Court for the Northern District of California, claims that the CEO of billionaire Tesla has tried to reduce the price of shares on Twitter because he wants to cancel the deal or negotiate a significantly lower purchase price.
The San Francisco-based Twitter has also been named as a defendant in a lawsuit seeking collective redress status as well as damages.
A Musk spokesman did not immediately respond to a comment on Thursday. Twitter declined to comment.
Musk offered to buy Twitter for $ 44 billion last month, but later said the deal could not continue until the company provided information on how many accounts on the platform were spam or bots.
However, the lawsuit notes that Musk has refused to properly scrutinize his “take it or leave it” offer to buy Twitter. This means that he has waived his right to review the company’s non-public finances.
Besides, the problem with bots and fake Twitter accounts is nothing new. The company paid $ 809.5 million last year to settle claims that it overestimated its growth rate and monthly user data. Twitter has also been revealing its ratings for the Securities and Exchange Commission’s bots for years, while warning that its rating may be too low.
To fund part of the acquisition, Musk is selling shares in Tesla, and shares in the electric car maker have lost nearly a third of their value since the deal was announced on April 25.
In response to the downgrading of Tesla’s shares, the Twitter shareholders’ lawsuit alleges that Musk denigrated Twitter, violating both the belittling and non-disclosure clauses with the company.
“In this way, Musk hoped to reduce the share price of Twitter and then use it as a pretext to try to renegotiate the buyout,” according to the lawsuit.
Shares of Twitter ended Thursday at $ 39.54, 27% below Musk’s $ 54.20 bid.
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 open the case within the timeframe required by the Securities and Exchange Commission.
The lawsuit also says that his possible disclosure of the case to the SEC was “false and misleading” because he used a form designed for “passive investors” – which Musk was not at the time, as he was offered position on the Twitter board and was interested in buying the company.
Musk took advantage of more than $ 156 million in his failure to disclose his stake in time, as Twitter’s stock price could have been higher if investors had known Musk was increasing his holdings, the case said.
“By delaying the disclosure of his stake in Twitter, Musk has engaged in market manipulation and bought shares of Twitter at an artificially low price,” the lawsuit said.
Add Comment