Tesla CEO Elon Musk has heavily invested in social media company Twitter. After expressing a desire to own his own social media company, the multi-billionaire purchased over 9% of Twitter stock. This means that Musk is one of the biggest shareholders in the company.
After announcing his purchase of his Twitter shares, prices for company shares increased by 27%. However, as Musk took so long to announce his stake, other shareholders have sued the tech mogul for artificially deflating share prices.
Why is Elon Musk being sued by Twitter shareholders?
Filed on Tuesday by Marc Bain Rasella, the latest Musk lawsuit claims that the billionaire purposefully failed to disclose share acquisition. This move allowed the Tesla CEO to purchase more stake at a lower price, knowing his announcement would increase prices.
The lawsuit alleges that Musk started purchasing Twitter shares back in January. However, he purposefully withheld knowledge of his investment until he had acquired almost 10% of the social media company.
By law, investors have to reveal their investment in a company once they acquire more than 5% of a company. An investor is given 10 days after crossing the threshold to file a Schedule 13 to the Securities and Exchange Commission.
The lawsuit claims that Musk acquired 5% by March 14th, but then almost doubled his stake to reveal his investment. Since the investment of the world's richest man is seen as a massive move for any company, Musk's involvement would inevitably increase prices. However, by not disclosing the investment, he could buy more stake for less money.
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Planning for an extremely hostile takeover
After acquiring so much of the company, Elon Musk was initially going to join Twitter’s Board of Directors. This means that the billionaire would be restricted from buying out the company for two years. However, Musk has since decided not to join the Board.
It would appear that Musk does plan on performing a hostile takeover of Twitter in the coming years. For example, by slowly buying more and more shares, Musk will be able to own the company. As one of the world's richest men, there's not really any stopping him.
The billionaire has frequently expressed disdain towards Twitter. While it is his social media platform of choice, the tech mogul has been upset at a minor number of posts being deleted for breaching terms of service.
Because of this, Musk has repeatedly claimed that Twitter doesn't allow for free speech. Additionally, the billionaire has already started to force features onto the website, including a controversial edit button.
Update: Elon Musk has confirmed plans for a hostile takeover of Twitter. As of April 14th, 2021, the Tesla CEO has offered to buy all of the company's stock for over $40 billion.
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