Twitter shareholder sues Elon Musk for alleged securities fraud over not disclosing his stake sooner

According to Bloomberg, Marc Bain Rasella sued Musk in Manhattan federal court on Tuesday, claiming that he was required to disclose his ownership of shared to the SEC by March 24, and by delaying his disclosure, he artificially kept its share price down, allowing him to buy more shares at a lower price and kept other holders from selling at increased profits.

Rasella filed the class action complaint in the United States District Court Southern District of New York, on behalf of "all others similarly situated."

The complaint states that Musk had acquired more than 5 percent ownership of the company by March 14, and that "Musk was required to file a Schedule 13 with the SEC within 10 days of passing the 5 percent ownership threshold in Twitter, or March 24, 2022.

"Musk did not file a Schedule 13 with the SEC within the required time and instead continued to amass Twitter shares, eventually acquiring a 9.1 percent stake in the Company before finally filing a Schedule 13 on April 4, 2022," the complaint states.

The document notes that following Musk’s filing, Twitter share prices rose from a closing price of $39.31 on April 1, to $49.97 on April 4, an increase of around 27 percent.

"Investors who sold shares of Twitter stock between March 24, 2022, when Musk was required to have disclosed his Twitter ownership, and before the actual April 4, 2022 disclosure, missed the resulting share price increase as the market reacted to Musk’s purchases and were damaged thereby," the complaint states.

Rasella’s lawsuit states that Musk was "motivated" to delay his disclosure, and was able to acquire more shares at a cheaper price.

The lawsuit seeks compensatory and punitive damages for "damages sustained as a result of Defendants wrongdoing, in an amount to be proven at trial, including pre-judgement and post-judgement interest thereon."

The lawsuit comes just days after Twitter CEO Parag Agrawal announced that Musk would in fact not be joining the company’s board of directors, around one week after an announcement was made that he would be.

In the announcement, Agrawal said, "The Board and I had many discussions about Elon joining the board, and with Elon directly. We were excited to collaborate and clear about the risks. We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward."