It looks like Elon Musk may be in trouble over his recent stock market activity. After all, Twitter shareholders have taken him to court claiming that by not disclosing his stake in the company in a timely manner, he caused its stock to remain low for days.
The lawsuit was filed this week in federal court in Manhattan. Musk’s plaintiffs claim that he was legally required to disclose his Twitter holdings by March 24th, but did so almost two weeks late, not until April 4th. When Musk finally disclosed his Twitter holdings on that date, his stock price jumped 27%.
Stock exchange law says that anyone buying up more than 5% of a company’s stock should notify the Securities and Exchange Commission within 10 days at the latest. Musk’s suing shareholders claim that he concealed this fact specifically, and investors who sold Twitter shares between March 24 and April 4 lost profits they would have realized had Musk followed the law. In turn, Musk was then able to continue buying Twitter shares at a discounted price knowing full well that their price would go up in a few days.
The lawsuit is the latest cover of a dramatic string of events related to Twitter. And it all started with Musk’s criticism of the strategy taken by the company’s bosses in recent times. When it seemed that Musk was trying to build his own social network, he bought 9.2 percent of all Twitter shares at one point in the stock market.
The investment immediately made him the company’s largest individual shareholder. There was also immediate speculation on the Intenet that he would join Twitter’s governing board of directors, where he would push his vision for the social network’s growth. Ultimately, he did not join the board of directors and all indications are that he will now have to explain his recent stock purchases in court.