A lawsuit filed earlier this week in the Southern District of New York claims that Elon Musk failed to properly file a “Schedule 13” with the Securities and Exchange Commission (SEC) within 10 days of surpassing the 5% ownership mark of Twitter Inc. The putative class action argues that shareholders who sold prior to the filing of his belatedly-submitted Schedule 13 “missed the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby.”
The ten-page civil suit introduces Musk as “the founder of Tesla and SpaceX, and according to Forbes, is the richest person in the world.” It explains that he began acquiring Twitter stock in January 2022 and reached more than 5% ownership by March 14. Though his Schedule 13 was reportedly due on March 24, he filed it late on April 4, after having acquired a 9.1% stake in the company.
Once his Schedule 13 became public news, the company’s share price rose from $39.31 per share on April 1, to close at $49.97 per share on April 4, an increase of approximately 27%.
The complaint says that Musk’s misrepresentations had dual effects. First, shareholders were unable to capitalize on the upward-trending price because they were unaware of Musk’s purchases, and second, the defendant himself was motivated to and able to acquire shares of Twitter less expensively during the nine-day class period by withholding the information.
The suit states one claim for relief against Musk for making materially false and misleading statements and omissions by failing to disclose to investors that he had acquired a 5% ownership stake in Twitter. It seeks relief on behalf of a class of “at least hundreds or thousands of members” who sold Twitter stock between March 24 and April 4, inclusive.
The plaintiff and putative class are represented by Block & Leviton LLP.