Elon Musk is being sued by a group of Twitter shareholders for failing to disclose his large stake in Twitter within the required timeframe. Musk is being sued in a class action suit. He is accused of delaying a required SEC filing as a major shareholder to buy more shares. Musk finally disclosed his position and the stock rose 27 percent. Investors who had sold shares felt left out.
CNBC reports that Tesla CEO Elon Musk is being sued by a group of Twitter shareholders for failing to disclose the purchase of a large state in Twitter within the required time frame. Musk disclosed on April 4th that he had bought a 9.2 per cent stake in Twitter. However, some shareholders claim that his disclosure was too late.
Federal law requires that investors notify the Securities and Exchange Commission within 10 days after purchasing more than 5 percent of shares in publicly traded companies. Musk is alleged to have purchased stock in January. He would have reached this milestone on March 14. Investors must inform the Securities and Exchange Commission (SEC) within 10 days of purchasing more than five percent of shares in a publicly traded company. However, he may not have done so.
Block & Leviton filed a lawsuit in New York on Tuesday on behalf of a group Twitter shareholders. They claim that Musk was able purchase more Twitter stock at a lower price between reaching the threshold of five percent ownership and publicly announcing his share of the company.
The Washington Post questioned a number legal and securities experts about whether Musk could have gained $156 million by delaying the disclosure. Twitter stock rose 27 percent after Musk revealed his 9.2 percent stake worth nearly $3 billion.
Alon Kapen is a Farrell Fritz corporate transaction lawyer who shared a statement with CNBC. “What seems clear is that Elon Musk missed Section 13(d), and 13(g of the Securities Act of 1933 for reporting 5% ownership in public companies.”
Kapen said that he had an additional 10 days to purchase shares. He increased his ownership by an additional 4.1 percent during this time, before the spike in share prices that took place on April 4.