A complaint was filed against Elon Musk regarding his stake in Twitter. The plaintiff, a Twitter investor, accuses him of of not having notified his investment soon enough with the Securities and Exchange Commission (SEC). A delay that has probably caused a loss of earnings for many investors.
The billionaire is the target of a class action lawsuit
On April 4, 2022, Elon Musk formalized his stake in Twitter. The billionaire took 9.2% of Twitter shares, the equivalent of 2.6 billion euros. With 73,486,938 titles, the CEO of Tesla and SpaceX became in a few seconds the first shareholder of the social network. Yes but it was probably not done in the rules of the art. Indeed, Musk’s stake in Twitter would have started in January to reach the famous 9.2% on March 14.
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According to US federal law, investors have 10 days to notify the Securities and Exchange Commission (SEC), the national stock market watchdog. Elon Musk missed that deadline and it likely spawned shortfall for other investors. It is in any case the subject of a class action of which Elon Musk is the target. Elon Musk should have notified the SEC by March 24. According to the plaintiff, this delay also allowed Elon Musk to enrich himself at the expense of other investors.
Did Elon Musk manipulate the stock market?
The class action claims gains of up to $156 million for Musk over that period. The complaint states that “Investors who sold shares of Twitter between March 24, 2022, when Elon Musk was required to disclose his ownership of Twitter, and before the actual disclosure on April 4, 2022, missed the price increase of resulting action when the market reacted to Elon Musk’s buying and were affected as a result”. Indeed, when Musk formalized his stake, the company’s shares went from $39.91 to $49.97 : an increase of about 27%.
By keeping quiet about his growing stake in Twitter, Musk was able to artificially keep the stock price down. Many investors would therefore have sold shares at prices “artificially deflated”. This is not the first time that Elon Musk is accused of messing with the stock market. In 2018, the Securities and Exchange Commission (SEC) was already prosecuting Elon Musk following statements “false and misleading” after the billionaire announced that he wanted to withdraw Tesla from the American stock exchange. At the time, he was fined 17 million euros.