Twitter shareholders are suing the company and potential acquirer Elon Musk as the latter two are still dealing with a chaotic acquisition process in progress, which has sent Twitter’s stock price wildly volatile. Musk disclosed his Twitter holdings on April 4, and ten days later offered to buy the company for $44 billion, or $54.20 per share.
He has sold and pledged most of his Tesla stock holdings as collateral for the loan to fund the deal. Twitter shares have fallen more than 12% since Musk’s bid, while Tesla shares have fallen about 28% amid a tech sell-off. Tesla shares have fallen about 40% since Musk first disclosed his Twitter holdings.
In a class-action lawsuit filed Wednesday, Twitter shareholders allege that Musk violated California corporate law on multiple fronts and engaged in market manipulation as a result.
Shareholders claim Musk has benefited financially by delaying disclosure of his Twitter holdings and by temporarily concealing his plans to become a member of the company’s board in early April.
The indictment alleges that Musk snapped up Twitter stock through private conversations with board members and executives, including Musk’s longtime friend and former Twitter CEO Jack Dorsey, as well as Silver Lake co-CEOs, Twitter board member Egon Durban. Egon Durban’s firm had invested in Tesla prior to its acquisition of SolarCity.
The proposed class-action also argues that Musk violated California law by raising public doubts about whether he would complete the deal after he signed the acquisition contract. Earlier this month, Musk said he would “put on hold” the Twitter acquisition to learn more about fake and spam accounts on the platform.
The shareholder said his complaints about the fake accounts were part of a plan to negotiate a better price or end the deal:
“Musk’s continued statements, tweets, and conduct designed to cast doubt on the deal and drive Twitter’s stock price down significantly in order to create leverage he hopes to use to exit the acquisition or renegotiate the 25% discount will result in the purchase price $11 billion less.”