Twitter shareholder Marc Bain Rasella on Tuesday filed a securities fraud lawsuit against Tesla CEO Elon Musk for his late disclosure of his stake in Twitter — a delay that the lawsuit claims saved Musk some $143 million.
The claim filed in New York claims that the late disclosure simultaneously cost Twitter shareholders that sold stock between March 24 and April 1. The complaint stated that Musk waited days to declare his investments of more than a 5% stake. By not disclosing the purchases, Musk is able to keep the price of the stock low and buy it at a premium, the complaint said.
Earlier this month, Musk had acquired a total of 9.2% stake in Twitter, becoming its largest shareholder before then declining a seat on its board of directors. Musk had failed to file paperwork for purchasing more than 5% of his stake in Twitter. Going above that threshold requires disclosure with the Securities and Exchange Commission, and it’s unclear what the consequences of that will be and how it might affect future purchases of more Twitter shares.
“Musk was motivated to delay his Schedule 13 filing. By failing to disclose his ownership stake via Schedule 13, Musk was able to acquire shares of Twitter less expensively during the Class Period,” the complaint said.
According to the lawsuit, Musk began buying Twitter shares in January. By March 14, he had surpassed a 5% ownership in Twitter. Musk did not submit this filing until he already acquired a 9.1% stake in the company, the complaint noted.
It remains unclear what Musk is planning to do with his new stake in the social media company. However, because he is no longer joining Twitter’s board, it’s possible that the billionaire is plotting to gain even more control over the social media platform and perhaps even mount a hostile takeover. If he can buy enough of Twitter’s shares to reach a 50.1% stake, that would give him controlling interest in the company.