The world's richest man isn't above trying to get a discount, apparently.
In a new lawsuit, Twitter shareholders are suing Elon Musk, alleging that he manipulated the price of the company's stock for his own benefit in the course of agreeing to buy the company. The lawsuit represents a group of Twitter investors but would allow any shareholders to receive financial compensation.
The suit was filed Wednesday in federal district court for Northern California and argues that Musk intentionally drove down the company's stock to secure a better deal. "The fair market value of Twitter securities has been adversely affected by Musk’s false statements and wrongful conduct," the complaint states.
The lawsuit cites Musk's decision to waive due diligence as a condition of the acquisition and his subsequent suspiciously timed claim that Twitter had misrepresented the number of bots on its platform.
"At the time, Musk was well aware that Twitter had a certain amount of 'fake accounts' and accounts controlled by 'bots' and had in fact settled a lawsuit based on the fake accounts for millions of dollars," the complaint states. "Musk had tweeted about that issue at Twitter several times in the past, prior to making his offer to acquire Twitter with full knowledge of the bots."
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
The suit alleges, as many people observed at the time, that Musk was likely trying to secure a discount by casting doubt on his commitment and disparaging the company. Since Musk's initial commitment to purchase the company was announced, tech stocks — including Tesla, which accounts for the vast majority of Musk's wealth — took a dive.
Following Musk's comments, Twitter shares also dipped significantly, a phenomenon that the suit alleges is "highly unusual" given the company's agreed-upon buyout price.
While Musk claimed the deal was on hold, there was no formal mechanism in place that would back up that claim. Even within Twitter, company leaders encouraged employees to proceed as though nothing had changed, noting that there was "no such thing" as casually pausing a binding agreement to buy the company.
The suit also alleges that Musk deliberately delayed filing a disclosure form when his stake in the company exceeded 5%, allowing him to continue to buy shares at a discount. After the form was filed and Musk's purchases became public knowledge, Twitter stock soared by nearly a third.
"Musk’s disregard for securities laws demonstrates how one can flaunt the law and the tax code to build their wealth at the expense of the other Americans," the complaint states.