Though the saga of Elon Musk joining the board of directors for Twitter was thought to be over, it has just taken a major turn. The Hollywood Reporter brings word that the Tesla CEO is being sued by other investors of the social media website that sold their shares of Twitter prior to the revelation that Musk had acquired a sizeable stake in the company, something the lawsuit alleges he did after the legally required timeframe. In the suit they allege that Musk failed to reveal to financial regulators that he had acquired more than a 5% stake in the company, a requirement by the Securities Exchange Act.
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“Defendant had the obligation, ability, and opportunity to prevent the issuance of the false statements and omissions alleged herein,” the suit reads in parts. “Because of his position as a 5% owner in Twitter, and access to material non-public information available to himself but not to the public, Defendant Musk knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the omissions being made were false and misleading.”
According to the lawsuit, Musk was required to reveal his substantial stake in Twitter by March 24, but didn’t do so until April 4. Shareholders that sold off their stock in that time lost considerable value since stock prices for Twitter rose by 27% when Musk’s investment was made public. The suit further alleges that Musk saved over $140 million in the time that he didn’t report his investments since the price didn’t fluctuate to new heights in that time. The lawsuit is hoping to assemble class action litigation against Musk, looking for “Investors who sold shares of Twitter Stock between March 24, 2022, and before the actual April 4, 2022 disclosure,” and thus “missed the resulting share price increase as the market reacted to Musk’s purchases.”
Musk was all set to become a member of the board of directors on Twitter starting April 9th but a sudden reversal by Musk and the company resulted in he no longer having a spot on the board. “The Board and I had many discussions about Elon joining the board, and with Elon directly,” Parag Agrawal, the CEO ofย shared on Sunday. “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. The board offered him a seat.”
“Elon’s appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best,” Agrawal added. “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.”
The saga continues…
