Twitter investors have proposed a class action lawsuit against Elon Musk and the platform over their handling of a 44 billion USD takeover bid. A class-action lawsuit is a case filed /defended by an individual who acts on behalf of a group of people. The suit accuses Musk of “wrongful conduct” and “violating California corporate laws” during the Twitter takeover. It states that billionaires’ “false statements” and “market manipulation” have created “chaos” at Twitter headquarters in San Francisco.
An investor named William Heresniak filed this case in a San Francisco Federal Court, saying that he was acting on behalf of himself and all others “similarly situated”. He alleged that Musk delayed the disclosure of his investment in Twitter and manipulated the company’s share price in the process.
Twitter Investors Want Compensation for Damages
According to the case filed by shareholders, Tesla boss received financial benefit by taking too long to disclose his stake in Twitter. The lawsuit claimed that Musk saved 156 million USD by delaying reporting that he had bought more than 5% of the Twitter stock in March. Furthermore, it said that Space X founder continued to buy until eventually reporting that he had purchased 9.2% in April. Twitter investors believed that the billionaire purchased the stock at an artificially low price and partook in market manipulation.
The case also alleged that Musk’s public criticism of Twitter was an attempt to lower the stock price further. It specifically mentioned his Tweet on 13 May, which indicated that he was temporarily putting his takeover bid on hold until Twitter proved that the fake accounts and bots on its platform accounted for less than 5% of its total users.
According to reports, US Securities and Exchange Commission (SEC) already started investigating the time frame of Musk’s investment disclosure this month. The commission requires investors to disclose their holdings within 10 days after purchasing 5% of any company’s stock. Twitter investors requested to be awarded an “unspecified amount” for damages Musk caused.
Does Elon Musk Want Lower Price for Twitter?
The case also alleged that the billionaire intensified his public criticism of Twitter 4 days after announcing that the deal would not move forward. One of the lawyers representing Twitter investors told the media that Musk was continuously criticizing the company he wanted to buy because he was seeking to renegotiate the deal.
The world’s richest person made a 44 billion USD offer to buy Twitter on 14 April in hopes of making it more aligned toward “freedom of speech”. The board of directors accepted it on 25 May. However, the billionaire has been raising concerns regarding fake, spam, and bot accounts on the platform ever since. He said if Twitter wanted the deal to go forward, it must show that such accounts are not more than 5% of its total user base. He also hinted in March that if Twitter failed to do that, he would try to pay less for the platform in its current state.
Share Price Down for Both Twitter and Tesla
The lawsuit comes after Twitter stock trades below 40 USD, 27% lower than the 54.20 USD share price Musk initially agreed to offer. The trend reflects the growing market scepticism surrounding the deal. It is unclear by what time it will be closed or whether it will close at the agreed price. One of the Twitter investors, The Orlando Police Pension Fund, claimed that according to the state law of Delaware, where Twitter is based, the deal should not be allowed to close before 2025.
On the other hand, Tesla stock is also going through a hard time. Critics argued that Musk’s public statements drove down electric vehicle (EV) manufacturer’s stock. Currently, Tesla is trading at 740 USD, coming down from 1000 USD in April. The manufacturer has lost more than 30% of its value since Musk signed the Twitter deal. The Twitter takeover saga has also triggered a debate over the implications of a powerful businessman owning a platform used by more than 210 million people. Moreover, it also plays a significant role in shaping the media and political agendas worldwide.
Second-richest person in the world, Jeff Bezos, trolled Musk on this particular issue. He quoted a Tweet from New York Times reporter that highlighted how China was the second-largest market for the carmaker. So after hearing that Musk was trying to buy the social media platform, Bezos made a joke that China might have leverage over Twitter now. It was a reference to The Great Firewall of China, a universal term for the Chinese government’s restrictions on western social media, free speech, and dissent.