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Twitter Shareholders are suing Elon Musk and Twitter over its handling of a chaotic acquisition process that is still ongoing, and that has contributed to volatile price swings in the company’s stock price.
The Tesla and SpaceX CEO disclosed a significant stake in Twitter on April 4, and 10 days later made a buyout offer for $44 billion, or $54.20 per share. He has sold and pledged a portion of his Tesla holdings as collateral for the loan to finance the deal.
Since Musk’s takeover bid, Twitter’s share price has fallen more than 12%, and is down nearly 28% as part of Tesla’s broad selloff in tech shares. Tesla shares were up more than 40% at the end of trading on Wednesday as Musk first disclosed his stake.
In a proposed class-action lawsuit filed Wednesday, Twitter shareholders allege that Musk violated California corporate law engaged in market manipulation on multiple fronts, and in doing so.
In a possible breach, they claim that Musk benefited financially by delaying necessary disclosures about his stake in Twitter and by temporarily hiding his plan in early April to become a board member on the social network. .
Musk also snapped shares on Twitter, the complaint said, while he knew insider information about the company based on private conversations with board members and executives, including former CEO Jack Dorsey, Musk’s longtime friend. and Silver Lake co-CEO Egon Durban. , a Twitter board member whose firm invested in SolarCity prior to its acquisition of Tesla.
Dorsey officially resigned from Twitter’s board of directors on Wednesday. shareholders Voted not to reinstate Durban,
The proposed lawsuit also argues that Musk broke California laws by raising doubts about whether he would complete the deal after signing a contract to buy it.
Earlier this month, Musk said he was putting Twitter acquisition “on hold” To learn more about unauthenticated activity on the platform, including information about fake or automated accounts.
The shareholders’ complaint said their gripes about the “bots” were part of a plan to negotiate a better price or scrap the deal.
“Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubts about the deal and to create leverage that drove Twitter’s stock down substantially, which Musk bought.” was expected to be used to exit or renegotiate the purchase price by up to 25%, which, if completed, would reduce the buyout consideration by $11 billion,” the complaint said.
According to California law, corporations in the state must exclude board members from voting on resolutions if they pertain to any form of misconduct or are associated with those resolutions.
Twitter declined to comment. Musk did not return a request for comment.
The case, Heresniak v. Musk et al, was filed in California Northern District Court and the shareholders are seeking a jury trial. Shareholders’ complaint is subject to further revision.