Former Twitter shareholders have filed a lawsuit against Elon Musk over a delay in disclosing his share purchase, which prevented them from cashing in on the rise in stock prices.
Musk is now the largest shareholder in the company and his announcement sent stock prices soaring 27 percent on the next trading day.
The Tesla and SpaceX CEO was offered a position on the social media company’s board, but declined.
The federal securities class action lawsuit was filed in Manhattan by shareholder Marc Bain Rasella “on behalf of all investors who sold or otherwise disposed of Twitter, Inc. securities between March 24, 2022, and April 1, 2022,” the period in which Musk owned the stocks, but had not disclosed.
Under the law, Rasella argues that Musk was required to file with the Securities and Exchange Commission within ten days because he purchased more than five percent of the company’s stocks.
The lawsuit argued that there were “hundreds or thousands” of people who “missed the resulting share price increase” unfairly, due to Musk’s delay.
“The members of the class [action lawsuit] are so numerous that joinder of all members is impracticable,” said Rasella.
Rasella is seeking “compensatory and punitive damages in favor of Plaintiff and the other class members against Defendant, jointly and severally, for all damages sustained as a result of Defendant’s wrongdoing, in an amount to be proven at trial, including pre-judgment and postjudgment interest thereon.”
Musk has not yet commented on the lawsuit.
The company’s stocks are likely to depend on Musk’s next moves. If he had accepted the board seat as proposed, he would have been barred from purchasing more than 14.9 percent of the company. His refusal leaves him free to acquire a larger stake, and more influence, if he so chooses.
“Musk updated an SEC filing on his Twitter holdings with language that suggests he plans to stay active in the company’s dealings, despite his expanding business empire that includes Tesla and SpaceX,” the New York Post reports. “The amended filing said Musk ‘may express his views to the Board and/or members of the Issuer’s management team and/or the public through social media or other channels with respect to the Issuer’s business, products and service offerings.'”