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Twitter Shareholders are suing Elon Musk and Twitter itself over their handling of a chaotic buyback process that is still underway, and that has contributed to the company’s stock price volatility.
The Tesla and SpaceX CEO revealed a substantial stake in Twitter on April 4, and ten days after the proposed buyback for $44 billion, or $54.20 per share. He had just sold and mortgaged part of his Tesla stock as collateral for loans to finance the deal.
Since Musk’s takeover offer, Twitter’s stock price has fallen more than 12% and Tesla’s about 28% as part of a widespread sell-off in tech stocks. Tesla’s stock price has dropped about 40% since Musk first revealed his shares.
In a proposed class action lawsuit filed on Wednesday, Twitter shareholders allege that Musk violated California enterprise Law on several fronts, and thus, engage in market manipulation.
First, they argue that Musk benefited financially by delaying necessary disclosures about his stake in Twitter and by temporarily concealing his plans to become a board member of the social network. this in early April.
Musk also shared on Twitter, the complaint said, while he knew inside information about the company based on private conversations with board members and executives, including the former CEO. Jack Dorsey, a longtime friend of Musk, and Silver Lake co-CEO. Egon Durban, a Twitter board member whose company previously invested in SolarCity before Tesla’s acquisition.
Dorsey officially resigned from Twitter’s board on Wednesday. Shareholder voted not to reinstall Durban.
The proposed class action also alleges that Musk violated California law by sowing doubts about whether he fulfilled the deal after signing it to buy it.
Earlier this month, Musk said he had booked Twitter acquisition “pause” to learn more about inauthentic activity on the platform, including fake or automated accounts.
The shareholder’s complaint says his hatred of “bots” is part of a plan to negotiate a better price or cancel the deal:
“Musk continues to make statements, send tweets, and engage in conduct designed to cast doubt on the deal and cause Twitter’s stock to drop significantly in order to create the leverage Musk hopes will used to back out of a purchase or to renegotiate a Buyback Price of up to 25% which, if exercised, would result in an $11 billion reduction in the Acquisition consideration.”
Under California state law, companies in the state must exclude board members from voting on proposals if they have committed some type of misconduct in connection with or in connection with the proposals. there.
Twitter declined to comment. Musk did not return a request for comment.
The case, Heresniak v. Musk et al, has been filed in the Northern District Court of California and shareholders are seeking a jury trial. The shareholder complaint may be further amended.
