Elon Musk founder of electric car manufacturer Tesla is facing court action over his stake in Twitter
(Picture: AFP via Getty Images)Elon Musk, the founder of Tesla and rocket company Space X, has been hit by a class action law suit just days after disclosing that he had become Twitter’s largest individual shareholder.
Filings last week showed the billionaire had built a 9.2% stake in Twitter valued at almost $3 billion (£2.3 billion).
In accordance with US law, investors are required to notify the US Securities and Exchange Commission (SEC) within 10 days if they acquire more than a 5% stake in a publicly listed company like Twitter.
Musk Musk passed the 5% threshold by 14 March but did not reveal his further stake publicly until 4 April.
The lawsuit alleges that in the time between passing a 5% reporting threshold and in publicly reporting his new stock, Musk was able to buy up additional shares at a lesser price.
Experts estimate that the delay could have resulted Musk netting $156 million (£120million).
Twitter shares rose 27% from $39.31 to $49.97 after Musk’s stake was revealed. The plaintiff in the law suite sold 35 Twitter shares for $1,373 (£1,056) or an average price of $39.23.
The proposed class action brought on behalf of the impacted shareholder by Block & Leviton, a securities litigation firm, read: “[The] Defendant had the obligation, ability, and opportunity to prevent the issuance of the false statements and omissions alleged herein.
“Because of his position as a 5% 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.”
The lawsuit is seeking a jury trial for unspecified compensatory and punitive damages.
