Twitter shareholder sues Elon Musk for bringing company’s stock down ‘substantially’

In a new turn to the Elon Musk and Twitter story, Twitter shareholders filed a lawsuit against Musk, alleging that the Tesla CEO has actively manipulated the company’s stock for personal gain. This in turn has allegedly brought “Twitter’s stock down substantially”. 

A class-action is a lawsuit that has been filed or is defended by an individual acting on behalf of a group of people and the proposed class-action lawsuit was filed this week at the US District Court for the Northern District of California by investor William Heresniak.  

The class-action lawsuit alleged that the billionaire “intended to create doubt and uncertainty about the deal”. Heresniak said that he was acting “on behalf of himself and all others similarly situated”. 

The suit claimed that several tweets posted by Musk, an active Twitter user with more than 95 million followers, were “misleading”. It particularly focused on his tweets on May 13 that the $44 billion acquisition was “temporarily on hold” while he “sought more information about the proportion of fake accounts” on Twitter. 

Also read: Elon Musk pegs more equity commitment to bring down Tesla loans from Twitter deal

“Musk was well aware that some Twitter accounts were controlled by software “bots” rather than real people, and had even tweeted about it prior to making his offer to buy the company. However, Musk proceeded to “make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially,” according to the complaint. 

Dan Ives, a tech analyst at investment firm Wedbush Securities, has said in a series of tweets on May 13 that Musk’s comments would “send this Twitter circus show into a Friday the 13th horror show”. 

“Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market,” he wrote. 

The lawsuit also claimed that Musk benefitted financially by delaying the disclosure of his significant stake in Twitter, and his plan to become a board member of the company. 

Musk had earlier hinted that he may seek to pay less for Twitter than the $44 billion agreed with the company’s board in March. Speaking at a technology conference earlier this month too, he said striking a deal at a lower price was “not out of the question”. 

“His aim was to gain leverage to get Twitter at a much cheaper price or back out of the deal without suffering any penalty,” the suit argued, adding that “Musk’s market manipulation worked — Twitter has lost $8 billion in valuation since the buyout was announced.” 

Ives said that the tweets and controversies surrounding the deal is “turning it into a circus show with many questions and no concrete answers as to the path of this deal going forward.”