AP

Elon Musk accused of breaking law in purchase of Twitter stock

Apr 12, 2022, 6:56 PM | Updated: Feb 13, 2023, 2:38 pm

FILE: Elon Musk speaks at the 2020 Satellite Conference and Exhibition on March 9, 2020, in Washing...

FILE: Elon Musk speaks at the 2020 Satellite Conference and Exhibition on March 9, 2020, in Washington. (Photo by Win McNamee/Getty Images)

(Photo by Win McNamee/Getty Images)

SAN FRANCISCO (AP) — Elon Musk’s huge Twitter investment took a new twist Tuesday with the filing of a lawsuit alleging that the colorful billionaire illegally delayed disclosing his stake in the social media company so he could buy more shares at lower prices.

The complaint in New York federal court accuses Musk of violating a regulatory deadline to reveal he had accumulated a stake of at least 5%. Instead, according to the complaint, Musk didn’t disclose his position in Twitter until he’d almost doubled his stake to more than 9%. That strategy, the lawsuit alleges, hurt less wealthy investors who sold shares in the San Francisco company in the nearly two weeks before Musk acknowledged holding a major stake.

Musk’s regulatory filings show that he bought a little more than 620,000 shares at $36.83 apiece on Jan. 31 and then continued to accumulate more shares on nearly every single trading day through April 1. Musk, best known as CEO of the electric car maker Tesla, held 73.1 million Twitter shares as of the most recent count Monday. That represents a 9.1% stake in Twitter.

The lawsuit alleges that by March 14, Musk’s stake in Twitter had reached a 5% threshold that required him to publicly disclose his holdings under U.S. securities law by March 24. Musk didn’t make the required disclosure until April 4.

That revelation caused Twitter’s stock to soar 27% from its April 1 close to nearly $50 by the end of April 4’s trading, depriving investors who sold shares before Musk’s improperly delayed disclosure the chance to realize significant gains, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella. Musk, meanwhile, was able to continue to buy shares that traded in prices ranging from $37.69 to $40.96.

The lawsuit is seeking to be certified as a class action representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take a year or more.
Musk spent about $2.6 billion on Twitter stock — a fraction of his estimated wealth of $265 billion, the largest individual fortune in the world. In a regulatory filing Monday, Musk disclosed he may increase his stake after backing out of an agreement reached last week to join Twitter’s board of directors.

Jacob Walker, one of the lawyers that filed the lawsuit against Musk, told The Associated Press that he hadn’t reached out to the Securities and Exchange Commission about Musk’s alleged violations about the disclosure of his Twitter stake. “I assume the SEC is well aware of what he did,” Walker said.

An SEC spokesperson declined to comment.

The SEC and Musk have been wrangling in court since 2018 when Musk and Tesla agreed to pay a $40 million fine t o settle allegations that he used his Twitter account to mislead investors about a potential buyout of the electric car company that never materialized. As part of that deal, Musk was supposed to obtain legal approval for his tweets about information that could affect Tesla’s stock price — a provision that regulators contend he has occasionally violated and that he now argues unfairly muzzles him.

Musk didn’t immediately respond to a request for comment posted on Twitter, where he often shares his opinion and thoughts. Alex Spiro, a New York lawyer representing Musk in his ongoing dispute with the SEC, also didn’t immediately respond to a query from The Associated Press.

KSL 5 TV Live

AP

Members of HM Coastguard Search and Rescue gather after homes were evacuated when a suspected Secon...

Pan Pylas

A World War II bomb prompted an evacuation in England before being taken to sea to be blown up

An unexploded World War II bomb has been safely transported through the eerily empty streets of the southwestern English port city of Plymouth.

2 hours ago

FILE: The University of Wyoming campus sign with the Wyoming Union in the background Friday March 2...

Mead Gruver

Highway crash in Colorado kills three University of Wyoming swimmers

A single-vehicle wreck on a highway in northern Colorado killed three members of the University of Wyoming swimming and diving team.

6 hours ago

This image provided by the Denver Police Department shows Miles Harford. Denver police are asking f...

Associated Press

Denver police search a former funeral home owner who kept the cremated remains of at least 30 people

Denver police are asking for the public's help in finding a former funeral home owner who they say kept a woman's body in a hearse for two years and also kept the cremated remains of at least 30 people.

22 hours ago

FILE...

Gene Johnson, Associated Press

Seattle officer who struck and killed graduate student from India won’t face felony charges

Prosecutors in Washington state said Wednesday they will not file felony charges against a Seattle police officer who struck and killed a graduate student from India while responding to an overdose call.

2 days ago

In this screen grab from lapel camera video provided by the Santa Fe County Sheriff's Office, movie...

Associated Press

Jury selection begins for trial of ‘Rust’ armorer in fatal 2021 shooting by Alec Baldwin

Prosecutors are pursuing accountability in the 2021 death of a cinematographer who was shot by actor Alec Baldwin during a rehearsal for the Western movie “Rust."

2 days ago

Investigators on the beach in Lauderdale-by-the-Sea, Fla., take photos of the scene of a sand colla...

Terry Spencer, Associated Press

A sand hole collapse in Florida killed a child. Such deaths occur several times a year in the US

A family trip to a Florida beach turned tragic when a 5-year-old Indiana girl digging a deep hole with her brother died after the sand collapsed on them.

2 days ago

Sponsored Articles

Modern chandelier hanging from a white slanted ceiling with windows in the backgruond...

Lighting Design

Light Up Your Home With These Top Lighting Trends for 2024

Check out the latest lighting design trends for 2024 and tips on how you can incorporate them into your home.

Technician woman fixing hardware of desktop computer. Close up....

PC Laptops

Tips for Hassle-Free Computer Repairs

Experiencing a glitch in your computer can be frustrating, but with these tips you can have your computer repaired without the stress.

Close up of finger on keyboard button with number 11 logo...

PC Laptops

7 Reasons Why You Should Upgrade Your Laptop to Windows 11

Explore the benefits of upgrading to Windows 11 for a smoother, more secure, and feature-packed computing experience.

Stylish room interior with beautiful Christmas tree and decorative fireplace...

Lighting Design

Create a Festive Home with Our Easy-to-Follow Holiday Prep Guide

Get ready for festive celebrations! Discover expert tips to prepare your home for the holidays, creating a warm and welcoming atmosphere for unforgettable moments.

Battery low message on mobile device screen. Internet and technology concept...

PC Laptops

9 Tips to Get More Power Out of Your Laptop Battery

Get more power out of your laptop battery and help it last longer by implementing some of these tips from our guide.

Users display warnings about the use of artificial intelligence (AI), access to malicious software ...

Les Olson

How to Stay Safe from Cybersecurity Threats

Read our tips for reading for how to respond to rising cybersecurity threats in 2023 and beyond to keep yourself and your company safe.

Elon Musk accused of breaking law in purchase of Twitter stock