Twitter shareholder sues Elon Musk, says company is paying a ‘chaos tax’ since purchase announcement - Fix Bdsthanhhoavn

Twitter shareholder sues Elon Musk, says company is paying a ‘chaos tax’ since purchase announcement

As Elon Musk maneuvers back and forth on his proposed purchase of Twitter, a Twitter shareholder sued Musk on Thursday, accusing the world’s richest person of making false and disparaging statements about the giant communications network to lower its stock value and his acquisition cost by billions.

After Twitter announced on April 25 that Musk, the CEO of Tesla Motors, had agreed to purchase Twitter for $44 billion, “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,” said the suit, filed in federal court in San Francisco, where Twitter is headquartered.

His tactics appeared to work, the suit said: Twitter’s stock value has declined by $8 billion, giving Musk leverage to renegotiate or back out of the purchase. Musk announced May 13 that the deal was “temporarily on hold” — tweeting just before the stock market opened that day — then declared four days later that his acquisition “cannot go forward” while claiming, without evidence, that nearly 20% of Twitter’s accounts were fakes, the suit said.

It was filed by a Virginia resident as a proposed class action on behalf of all Twitter stockholders, seeking compensation for their losses and punitive damages against Musk. Attorney Joseph Cotchett said he does not know how many Twitter shareholders would support such a lawsuit, but his firm has received “a lot of calls from shareholders” with similar concerns.

In response to queries from news organizations, Musk replied to one from Business Insider: “Just because your name is Business Insider Trading doesn’t mean you should project that on others!” He did not say anything about the lawsuit.

Tesla shareholders are also suing Musk over his tweets in 2018 that declared he had obtained financing to take the electric-car company private, ending its public stock trading. He and Tesla paid fines of $20 million each to the Securities and Exchange Commission in a settlement that also required Musk to resign as the chairman of Tesla’s board. Musk has tried to undo the settlement, saying he had been unfairly pressured into it, but a federal judge in Detroit ruled against him last month.

The Wall Street Journal has reported that the SEC is also investigating Musk over the timing of his disclosure of purchases of Twitter stock. As described in Wednesday’s shareholder suit, Musk had acquired more than 5% of the company’s stock by early this month but waited more than 10 days to make the legally required disclosure to the SEC. That kept the stock price down and enabled Musk to save $156 million in continued purchases that made him Twitter’s largest shareholder at 9.2%, the suit said.

“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 suit said.

It quoted another Wall Street Journal article that said Twitter, plagued by confusion about Musk’s shifting plans, has frozen its hiring, fired two senior executives and is suffering from what another executive described as a “chaos tax.”

Bob Egelko is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @BobEgelko

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