Elon Musk faces wrath from Twitter Shareholders as they file a lawsuit against him over unlawful conduct
Elon Musk is being sued by Twitter shareholders for engaging in “unlawful conduct” in order to cast doubt on his attempt to buy the social media firm.
According to the lawsuit, filed late Wednesday in the United States District Court for the Northern District of California, the billionaire Tesla CEO attempted to drive down Twitter’s stock price in order to walk away from the transaction or negotiate a much cheaper purchase price.
based in San Francisco The lawsuit also names Twitter as a defendant, and it seeks class-action status as well as financial compensation.
Musk’s spokesperson did not immediately respond to a message seeking comment on Thursday. Twitter did not respond to requests for comment.
Musk made a $44 billion offer to buy Twitter last month, but the deal was halted after the firm failed to disclose information on how many accounts on the platform are spam or bots.
Musk, on the other hand, waived due diligence for his “take it or leave it” bid to buy Twitter, according to the lawsuit. That means he gave up his right to inspect the company’s confidential financial records.
Furthermore, the issue of bots and fraudulent accounts on Twitter is not a new one. Last year, the business agreed to pay $809.5 million to settle charges that it overstated its growth rate and monthly user numbers. For years, Twitter has disclosed its bot estimates to the Securities and Exchange Commission, while simultaneously cautioning that the estimate could be too high.
Musk has been selling Tesla stock to help fund the acquisition, and the electric carmaker’s stock has lost about a third of its value since the deal was announced on April 25.
The Twitter shareholders’ lawsuit claims Musk has been disparaging Twitter in response to the stock’s decline, violating both the non-disparagement and non-disclosure sections of his contract with the business.
According to the lawsuit, Musk “hoped to drive down Twitter’s stock price and then use that as a pretext to try to re-negotiate the buyout.”
Twitter’s stock closed at $39.54 on Thursday, down 27% from Musk’s $54.20 offer price.
Musk said in early April that he had purchased a 9% interest in Twitter before declaring his offer to buy the firm. However, according to the lawsuit, Musk failed to declare his investment within the deadline set by the Securities and Exchange Commission.
Musk’s ultimate disclosure of the stock to the SEC was “false and misleading,” according to the lawsuit, because he used a form intended for “passive investors,” which Musk was not at the time because he had been offered a spot on Twitter’s board and was interested in buying the company.