Twitter Investors Files Class Action Lawsuit against Elon Musk

UTC by Godfrey Benjamin · 3 min read
Twitter Investors Files Class Action Lawsuit against Elon Musk
Photo: Shutterstock

The more the acquisition deal stalls, the more the social media giant’s valuation slumps.

Elon Musk, the Chief Executive Officer of Tesla Inc (NASDAQ: TSLA) and SpaceX has been dragged to court as a group of Twitter Inc (NYSE: TWTR) investors led by Virginia resident William Heresniak filed a lawsuit against the CEO. As reported by CNBC, the aggrieved investors said Musk violated California’s corporate laws by delaying disclosing his stake in the company when he took more than a 5% stake in the firm.

The investors said Musk continued adding to his stake when he had insider information about the company, and the delayed disclosure earned him an additional $156 million discount in his subsequent purchases.

The investors are also naming Twitter as part of the defendants in the class-action lawsuit for which they are demanding an undisclosed amount of money in compensation for all punitive and compensatory damages. As part of the position of the investors, the delay in completing the acquisition deal after Musk signed the contract is also an attempt to get a better discount or negotiating power which could see about $11 billion slashed from the $44 billion negotiated price.

At the moment, the share price of Twitter is worth $39.52 after plunging by about 12% from the price the deal was inked.

“Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or to re-negotiate the buyout price by as much as 25% which, if accomplished, would result in an $11 billion reduction in the Buyout consideration,” the complaint said.

The financial world has changed a lot since the Twitter Bid was announced in mid-April. Tesla shares, which Elon Musk pledged as collateral to secure a loan to finance the Twitter acquisition have plunged remarkably, further forcing the billionaire to seek funding for the bid from various sources.

Declining Twitter Valuation Amidst Elon Musk Bid

The more the acquisition deal stalls, the more the social media giant’s valuation slumps. As reported earlier this month by Coinspeaker, Twitter has shed as much as $9 billion due to complications arising from the deal. One of the major issues attributed to the delay is the statistics of spambots on the platform which Elon Musk said he needs evidence of less than 5%.

Elon Musk also disclosed recently that Twitter’s legal team told him he violated the company’s Non-Disclosure Agreement (NDA) when he revealed the company’s spam or fake account sampling size is less than 5%.

That Elon Musk wants to proceed with the Twitter buyout is not a myth, and his free speech agenda has the backing of a number of investors including Binance CEO, Changpeng Zhao and long-time friend, Jason Calacanis, both of whom are committing funds to help him take the social media firm private.

Business News, News, Social Media, Technology News
Related Articles