On Wednesday night, Twitter stockholders filed a new lawsuit against Tesla CEO Elon Musk in federal district court in San Francisco. The lawsuit says that Musk manipulated the company’s stock to help himself.
The lawsuit is about what Musk did after he signed the agreement to buy Twitter with Twitter’s board on April 25. In particular, it is about his recent statement that the deal “cannot go forward” without more information about automated accounts on the network.
According to the complaint, after signing the agreement, Musk “went on to make statements, send tweets, and do other things designed to create doubt about the deal and drive Twitter’s stock down significantly.” He did this to give himself the power to either back out of the deal or renegotiate the price.
“MUSK’S ACTIONS WERE AND ARE STILL AGAINST THE LAW.” The lawsuit says, “As described below, Musk’s actions were and still are illegal, in violation of the California Corporations Code, and against the contractual obligations he agreed to in the arrangement.”
The case is a proposed class action that was started by a small number of shareholders, but they want all shareholders to share the damages. Twitter wouldn’t say anything about it.
Even though Musk’s actions are unusual, it doesn’t look like the Tesla CEO has tried to end or change the agreement. Still, the accusations in the case are backed up by the fact that Twitter’s shares continue to trade for a lot less than the agreed-upon purchase price. As of press time, Twitter shares were trading for less than $40, which showed that the market wasn’t sure if the deal would go through at the agreed-upon price of $54.20.
In particular, the case asks the court to issue an injunction, which could force Musk to buy Twitter at the agreed-upon price.
Uncertainty about Musk’s public statements has already had a big effect on the takeover plan, sending Tesla shares down so much that Musk had to give up trying to borrow money by putting his business assets up as collateral. Musk told the Securities and Exchange Commission earlier this week that he would put in an extra $6 billion in stock capital to make up for the loans that had run out.