Twitter Shareholder Sues Elon Musk Over Delayed SEC Disclosure

The lawsuit argues Musk benefited from the move.

Twitter Shareholder Sues Musk Over Delayed SEC Disclosure
Image by Abhishek Mishra/Fossbytes

Twitter shareholder Marc Bain Rasella sued Elon Musk for his delay in filing SEC disclosure. He filed a lawsuit in a New York district court against Elon Musk. Marc complained that by keeping the purchase a secret, Musk caused great loss to traders.

The lawsuit filed by the Twitter Shareholder

An excerpt from the lawsuit states, “Investors who sold shares in Twitter stock between March 24, 2022, when Musk was required to disclose his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby.

According to Marc Bain Rasella, Elon Musk refrained from disclosing his ownership to keep the share prices from inflating. Using this tactic, he bought more stakes in the company at the lowest possible price. If he had disclosed the secret and filed the Section 13G within due time, a lot of traders could have benefited from it. But Elon Musk kept it a secret from 24 March to 1 April, thus creating a window of opportunity for himself.

Twitter shareholder sues Elon Musk

Elon Musk purchased 73 million shares which amount to over a 9% stake in Twitter. According to Section 13G, if someone buys more than a 5% stake in a company, they have to disclose it. Twitter shareholder Marc noticed that musk refrained from disclosing his enormous purchase of Twitter shares. Thus, he committed securities fraud.

Current Twitter share price

Twitter share prices rose from $38 to $48 between 1 April and 4 April, and then came crashing down to around $44. The cause of the downfall in share price could be due to Elon Musk rejecting the offer to join the Twitter board. Twitter CEO Parag Agarwal was excited to have Musk on board on the condition that he wouldn’t buy more than 14.9% stakes.

The condition didn’t sound great to Elon Musk, after which he rejected the Twitter Board offer. He continued to talk about Twitter and its features and even shared polls to introduce an Edit button on the popular social platform.

SEC can impose a hefty fine on Elon Musk for committing securities fraud. But it is a trivial matter for someone as big and busy as Elon Musk. He and his team may find out a way to come out of this predicament unscathed.

Abhishek Mishra

Abhishek Mishra

I love exploring technology and devote my time to curating detailed posts and supplying credible information to inquisitive users. I wish I had some spare time to play a few RPGs or clean my desk.
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