Elon Musk Twitter Stock Price Manipulation Class Action

Elon Musk’s proposed buyout of Twitter has repeatedly been in the news, alternately seeming sure and in jeopardy. But the complaint for this class action brings suit on behalf of Twitter shareholders, against both Musk and Twitter, alleging that Musk has tried to manipulate the price of the stock and to deliberately depress it, harming other Twitter stockholders, in order to improve the terms of the deal for himself.

The class for this action is all Twitter, Inc. stockholders who have been harmed or who are threatened with harm by Musk’s and Twitter’s unlawful conduct in connection with Musk’s proposed buyout of Twitter.

On April 25, 2022, Twitter announced it was selling itself to Musk at a price of $54.20 per share, totaling around $44 billion. The complaint claims Musk “according to the press, specifically agreed to waive detailed due diligence as a condition of the merger agreement.

The complaint alleges that “Musk was well aware that Twitter had a certain amount of ‘fake accounts’ and accounts controlled by ‘bots’…” He was also aware of two lawsuits Twitter had settled, the complaint claims, one on fake accounts and accounts controlled by bots, and the other “alleging Twitter [had] overstated its user numbers and growth rate[,]” which are relevant to its success.

Musk put up his Tesla stock as collateral for a $12.5 billion loan to buy Twitter, but after the announcement of the buyout, Tesla’s share price fell by more than 37%.

Since this might have required a margin call or other action from Musk, he tried to force the price of Twitter downwards, the complaint alleges: “Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or re-negotiate the buyout price…”

According to the complaint, Musk began making disparaging statements about Twitter and putting out tweets that called the deal into question, including one claiming that the deal was “temporarily on hold” due to his questioning of the numbers of fake accounts and bots.

The complaint claims that that manipulation has worked, with Twitter losing around 25% of its value.

Musk had been purchasing Twitter shares before the announcement of the deal, but the complaint alleges that he did not file the required Form 13G on time when he had acquired more than 5% of the company. The complaint claims this also benefitted him because he was able to continue to buy shares at lower prices.

Article Type: Lawsuit
Topic: Securities
Tags: Market Manipulation, Providing False or Misleading Information, Securities