The lawsuit has been filed in Manhattan federal court by Marc Bain Rasella on behalf of “all investors who sold or otherwise disposed of Twitter, Inc. securities between March 24, 2022 and April 1, 2022, inclusive,” reports TechCrunch.
“Musk, because of his position as a 5 per cent owner in Twitter, had an obligation to file a Schedule 13 with the SEC (Securities and Exchange Commission),” the lawsuit read.
The SEC requires investors to file a Schedule 13 within 10 days of passing the 5 per cent threshold.
Musk did not submit the filing until he had taken a 9.2 per cent stake in Twitter.
“Because of his position as a 5 per cent owner in Twitter, and access to material non-public information available to himself but not to the public, defendant Musk knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the omissions being made were false and misleading,” said the lawsuit.
“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 $39.91 per share on April 1, 2022, to close at $49.97 per share on April 4, 2022 — an increase of approximately 27%,” reads the lawsuit.
In a dramatic twist, Twitter CEO Parag Agrawal announced earlier this week that Musk will not join the board of the company, saying that “he believes it is for the best”.
The Indian-origin CEO last week said the micro-blogging platform has appointed Musk to its board of directors.
Musk, who acquired 9.2 per cent share in the micro-blogging platform for nearly $3 billion, is limited from buying more than 15 per cent of Twitter’s stock.