Tesla founder Elon Musk has been sued by former Twitter shareholders who say he did not disclose his stake in the tech giant in a timely fashion and thus, they missed out on profits from the social media platform's rise in stock.
Musk purchased a 9.2 percent stake in Twitter on March 24, making him the largest shareholder in the company. He was later offered a position on the company's board but has since rejected it, which means he will not face the same limits on how much Twitter stake he can own that he would have been under had he accepted a role on the board.
Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk
— Parag Agrawal (@paraga) April 11, 2022
Plaintiff and stockholder Marc Bain Rasella filed a class-action lawsuit against Musk on behalf of all Twitter shareholders who held stock between the day Musk passed the five percent ownership threshold on March 24, and April 1.
The lawsuit claims that Musk was required to file his stake with the Securities and Exchange Commission within 10 days after passing the 5 percent ownership threshold but that he failed to do so until April 4.
Twitter shares rose 27 percent from April 1 to April 4, when Musk announced his stake in Twitter, and individuals who bought out of the stock missed out on the share price increase, the lawsuit argues.
"The members of the class [action lawsuit] are so numerous that joinder of all members is impracticable," Rasella said in the suit.
Rasella said he is seeking "compensatory and punitive damages" for himself and the other former shareholders in the suit. The dollar amount for Musk's "wrongdoing" shall be determined at a trial, the lawsuit reads.