Class Action Alleges Elon Musk Hurt Twitter Investors by Delaying Disclosure of Ownership Stake

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Elon Musk faces a proposed class action that alleges the Tesla and SpaceX founder and current richest person in the world injured Twitter investors financially by failing to timely disclose his new ownership stake in the company. 

The 10-page lawsuit, filed in New York on April 12, alleges Twitter investors who sold shares of the social media platform’s stock between March 24, 2022, when Musk was reportedly required by law to have disclosed his Twitter ownership, and April 4, the day on which he actually disclosed his acquisition of a 9.1 percent stake in the company, missed out on the share price bump that followed Musk’s announcement. 

According to the suit, Musk’s delay in disclosing his Twitter ownership stake saved him roughly $143 million on his purchases of shares in the company. 

The case alleges that by failing to disclose his ownership stake in Twitter via a Schedule 13D with the Securities Exchange Commission, Musk “was able to acquire shares of Twitter less expensively” between March 24 and April 4. According to the case, although Musk was required to file a Schedule 13D disclosure with the SEC within 10 days of his passing the five-percent ownership threshold in Twitter, he was “motivated to delay” the filing to avoid having to pay a higher price for additional Twitter shares. 

“When Musk finally filed the required Schedule 13, thereby revealing his ownership stake in Twitter, the Company’s shares rose from a closing price of $39.31 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022—an increase of approximately 27%,” the lawsuit states, alleging that Musk “continued to amass Twitter shares” before announcing his more than nine-percent ownership stake. 

The plaintiff claims to have sold shares of Twitter during the relevant time period at “artificially deflated prices” and been damaged by “the revelation of the [sic] Musk’s material misrepresentations and material omissions.” 

The lawsuit looks to cover all persons and entities who sold Twitter securities between March 24 and April 4, 2022. 

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