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The
investors said Musk saved himself $156 million by failing to
disclose that he had purchased more than 5% of Twitter by March
14. They asked to be certified as a class and to be awarded an
unspecified amount of punitive and compensatory damages.
They also named Twitter as a defendant, arguing the company had
an obligation to investigate Musk's conduct, though they are not
seeking damages from the firm.
The investors said Musk continued to buy stock after that, and
ultimately disclosed in early April that he owned 9.2% of the
company, according to the lawsuit, filed on Wednesday in San
Francisco federal court.
"By delaying his disclosure of his stake in Twitter, Musk
engaged in market manipulation and bought Twitter stock at an
artificially low price," said the investors, led by Virginia
resident William Heresniak.
Neither Musk nor his lawyer immediately responded to requests
for comment. Twitter declined to comment.
The investors said the recent drop in Tesla's stock has put
Musk's ability to finance his acquisition of Twitter in "major
peril" since he has pledged his shares as collateral to secure
the loans he needs to buy the company.
Tesla's shares were trading at around $713 on Thursday
afternoon, down from above $1,000 in early April.
The timing of Musk's disclosure of his stake has already
triggered an investigation by the U.S. Securities and Exchange
Commission (SEC), the Wall Street Journal reported earlier this
month.
The SEC requires any investor who buys a stake exceeding 5% in a
company to disclose their holdings within 10 days of crossing
the threshold.
The investors also said public criticism by Musk of the company,
including a May 13 tweet stating the buyout was "temporarily on
hold" until Twitter proved that spam bots accounted for less
than 5% of its users, amounted to an attempt to further drive
the share price down.
Musk on Wednesday pledged an additional $6.25 billion in equity
financing to fund his bid for Twitter, a sign he is still
working to complete the deal.
Musk was sued earlier this month in Delaware Chancery Court by a
Florida pension fund seeking to halt the deal on the basis that
some other big Twitter shareholders were supporting the buyout,
a violation of Delaware law. Heresniak's lawsuit does not seek
to stop the takeover.
(Reporting by Luc Cohen in New York and Tom Hals in Wilmington,
Del.; Editing by Noeleen Walder, Nick Zieminski and Matthew
Lewis)
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