Elon Musk is no stranger to controversy. Barely a week goes by without the Tesla co-founder and CEO getting into an online fight or landing himself in trouble. We don't normally cover those because they are political and/or pointless. However, in the latest problem to befall Musk, he is being sued for allegedly artificially tampering with Twitter's share price.
Shareholder Marc Rasella is leading a class-action lawsuit against Elon Musk. The group Rasella leads claims Musk withheld his SEC filings revealing his 5% buyout of Twitter longer to keep the share price low.
As the price remained low, he was able to buy up more stock at a lower price. According to the lawsuit, Musk was meant to disclose his share buyout of Twitter in an SEC filing by March 24. By that time he had 5% of the company. This is a mandate from U.S. lawmakers that states investors must disclose a purchase within 10 days if they buy at least 5% of a company.
Low Purchase Price
Musk did not meet this deadline and filed the SEC on April 1. By that time he had bought a further 4.2% of Twitter at the lower price. As well as getting a better deal, Musk also prevented other shareholders from making a profit on an increased price.
This is because when Musk did announce his purchase, Twitter's price grew 27%. It is reasonable to presume this would have happened had he made the announcement on time.
Rasella did sell his Twitter shares during the week before Musk's announcement, getting the average price instead of the higher post-announcement price.
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