Billionaire Elon Musk is facing a lawsuit following a week of headlines created by his purchase of 9.2 percent of Twitter's stock. An investor sued Musk on Tuesday and proposed a class-action lawsuit against him for not disclosing his purchase to the Securities and Exchange Commission sooner.
The plaintiff, Marc Rasella, said in the lawsuit filed in federal court in Manhattan, New York, that he lost money by selling shares of Twitter at “artificially deflated prices” because Musk waited beyond the mandated SEC deadline to disclose his stake.
Musk disclosed in an SEC filing on April 4 that he had bought shares representing 9.2 percent of Twitter, making him the largest outside shareholder of the company’s stock. The share price rose more than 27 percent after the news.
Rasella said in the lawsuit that Musk had an obligation mandated by the SEC to disclose his stake within 10 days of passing a 5 percent ownership threshold, a deadline that would have been March 24.
“Plaintiff and the Class would not have sold Twitter’s securities at the price sold, or at all, if they had been aware that the market prices had been artificially and falsely deflated by Defendant’s misleading statements,” the lawsuit said.
Musk has long been an avid Twitter user, but his interest as an investor is more recent. Over the weekend, he declined an invitation to join the Twitter board, a position that would have closed off the possibility of a hostile takeover and limited what he could say about the social media company.
The lawsuit did not ask for a specified amount in damages, but it said Musk saved about $143 million by filing his form after the SEC deadline and purchasing shares in the meantime.
Representatives for Musk, the world’s wealthiest person according to Forbes, did not immediately respond to a request for comment submitted to Tesla, the automaker where Musk is CEO.
Twitter declined to comment on the suit.