Twitter shareholders have filed a lawsuit in which Elon Musk has been accused of engaging in “illegal behavior” aimed at casting doubt on his bid to buy the social media company.
The lawsuit filed late Wednesday in the U.S. District Court for the Northern District of California claims that billionaire Tesla’s CEO has tried to drive down Twitter’s stock price because he wants to walk away from the deal or negotiate a significantly lower purchase price.
San Francisco-based Twitter is also mentioned as a defendant in the lawsuit, which is demanding a class action lawsuit as well as damages.
A Musk representative did not immediately respond to a request for comment on Thursday. Twitter declined to comment.
Musk last month offered to buy Twitter for $ 44 billion, but later said the deal could not continue until the company provided information on how many accounts on the platform were spam or bots.
The lawsuit notes, however, that Musk waived due diligence for its “take it or leave it” offer to buy Twitter. This means that he waived his right to look at the company’s non-public finances.
In addition, the problem of bots and fake accounts on Twitter is nothing new. The company paid $ 809.5 million last year to resolve allegations that it was exceeding its growth rate and monthly user figures. Twitter has also revealed its bot estimates to the Securities and Exchange Commission for several years, while warning that its estimate may be too low.
To finance part of the acquisition, Musk has sold Tesla shares and the shares in the electric car manufacturer have lost almost a third of their value since the deal was announced on April 25.
In response to the declining value of Tesla’s shares, Twitter shareholders’ lawsuit claims that Musk has degraded Twitter and violated both non-derogatory and non-discriminatory clauses in his contract with the company.
“By doing so, Musk hoped to drive down Twitter’s stock price and then use it as an excuse to try to renegotiate the acquisition,” according to the lawsuit.
Twitter shares closed at $ 39.54 on Thursday, 27% below Musk’s price of $ 54.20.
Before Musk announced its bid to buy Twitter, Musk revealed in early April that he had bought a 9% stake in the company. However, the lawsuit states that Musk did not disclose the action within the time frame required by the Securities and Exchange Commission.
And the lawsuit alleges that his possible disclosure to the SEC was “false and misleading” because he used a “passive investor” form – which Musk was not at the time, as he had been offered a seat on Twitter and was interested in to buy the company.
Musk benefited by more than $ 156 million from failing to disclose his increased stake in time, as Twitter’s share price could have been higher if investors had known Musk was increasing its holdings, the lawsuit claims.
“By delaying its disclosure of its stake in Twitter, Musk engaged in market manipulation and bought Twitter shares at an artificially low price,” the lawsuit states.
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