SAN FRANCISCO, California (Washington Insider Magazine) – Elon Musk is being sued by Twitter shareholders for indulging in “unlawful conduct” in order to cast suspicion on his bid to acquire the social media platform.
According to ABC NEWS, the lawsuit filed late Wednesday in the United States District Court for the Northern District of California asserts that the billionaire Tesla CEO attempted to drive down Twitter’s share price price in order to back out of the deal or negotiate a significantly lower buying price.
Twitter, headquartered in San Francisco, is also mentioned as a defendant in the suit, which demands class action status along with monetary compensation.
Musk’s spokesperson did not respond to requests seeking comment on Thursday. Twitter did not respond to requests for comment.
Musk made a $44 billion offer to purchase Twitter last month, but the acquisition was halted after the company failed to disclose information on how many profiles on the website are bots or spam.
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 fake accounts and bots on Twitter is not a new one. Last year, the business agreed to pay $809.5 million to settle charges that it overstated its rate of growth and monthly user numbers. For years, Twitter has revealed its bot figures to the Securities & Exchange Board, while simultaneously warning that the estimate could be too low.
Musk has been selling Tesla shares to help fund the acquisition, and the electric carmaker’s stock has dropped about a third of its value since the deal was struck on April 25.
The Twitter shareholders’ suit alleges Musk has been disparaging Twitter in response to the stock’s decline, breaching both the non-disclosure and non-disparagement clauses of his agreement with the company.
According to the lawsuit, Musk hoped to drive down Twitter’s stock value and then use it as a pretext to try to re-negotiate the buyout.
Twitter’s shares closed at $39.54 on Thursday, down 27% from Musk’s $54.20 initial offer.
Musk said in early April that he had purchased a 9% stake in Twitter before declaring his offer to buy the company. However, according to the lawsuit, Musk failed to declare his investment within the deadline set by the Securities & Exchange Board.
Musk’s ultimate declaration of the stock to the SEC was “false and misleading,” according to the lawsuit, since he used a form intended for “passive investors,” which Musk was not at the time because he had been granted a seat on Twitter’s board and was keen on buying the company.
According to the lawsuit, Musk profited over $156 million by failing to declare his increased stake in time, because Twitter’s stock price may have been higher if investors had realized Musk was expanding his ownership.
