Tesla Inc TSLA CEO Elon Musk was on Tuesday sued by former Twitter Inc TWTR shareholders for failing to reveal by March 24 that he had invested in the microblogging site, Reuters reported on Tuesday, citing a proposed class-action lawsuit.
What Happened: The lawsuit, filed in Manhattan federal court, claims the former shareholders missed out on the recent rise in Twitter’s stock because Musk’s disclosure came in too late.
Twitter shares had soared 27% after Musk first disclosed a 9.2% stake on April 4, way past the March 24 deadline. The world’s richest man revealed his Twitter stake in a 13G disclosure instead of a 13D form, later updated to show that the stake was worth 9.1%.
U.S. Securities and Exchange law requires disclosures to be filed within ten days of buying a stake of over 5%.
See Also: Elon Musk Could Face Regulatory Ire Over His Twitter Stake: Reuters
Why It Matters: The lawsuit alleges that the delayed disclosure let Musk buy more Twitter shares at lower prices while defrauding the shareholders into selling at "artificially deflated" prices, according to the report.
It seeks unspecified compensatory and punitive damages.
Tesla is not a defendant. An email sent to the company did not elicit a response outside normal business hours.
Musk declined to join the Twitter board just days after revealing a large stake in the company.
The move allows Musk to keep piling up more Twitter shares without being bound by an agreement to limit his stake to 14.9%.
Price Action: Twitter stock closed 5.4% lower at $44.5 a share on Tuesday.
Benzinga's Take: It is common that when there are events or news surrounding public companies, shareholder lawsuits are filed. These aren't known to typically impact the concerned stock(s).
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