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Elon Musk sued by Twitter shareholder over SEC disclosure delay

The investor claims that Musk not revealing his stake kept share prices low artificially.

Elon Musk

Elon Musk has been sued for breaking SEC rules.

Photo: Brendan Smialowski/AFP

As expected, a Twitter shareholder has sued Elon Musk for failing to disclose his ownership stake in the company during the SEC-mandated window, alleging that hiding this fact kept the company's share price low.

In the lawsuit filed Tuesday in the U.S. District Court of the Southern District of New York, Twitter shareholder Marc Bain Rasella accused Musk of securities fraud, claiming that because Musk didn't disclose his sizable stake in the company by March 24, he was able to snap up more shares at a lower price. After Musk revealed that he had acquired more than 9% of Twitter, shares of the company spiked 27% (from $39 to $48) between April 1 and April 4. Rasella wants to represent investors who sold shares of Twitter between March 24 and April 1, the time period between when Musk should have revealed his stake and when he actually did.

"Investors who sold shares in Twitter stock between March 24, 2022, when Musk was required to disclose his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk's purchases and were damaged thereby," the court filing reads.

Musk acquired 73 million shares — a more than 9% stake — in Twitter last month, but flouted the rules when he did so. Musk didn't file a Schedule 13G within 10 days of his purchase, which is required if an individual buys a more than 5% stake in a company. Musk paid $2.6 billion for his shares, which are now worth around $3.25 billion, as Twitter's stock fell on Tuesday to $44.60 per share.

The drama over Musk's investment in Twitter has been unending in the last week. After announcing that the Tesla CEO would be joining Twitter's board of directors, Twitter CEO Parag Agrawal announced Sunday night that Musk had decided to withdraw. Now Elon watchers — and Twitter employees — are watching to see whether he continues to criticize the company via tweet or decides to put his money where his mouth is and take over Twitter entirely.

Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

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