Billionaire Elon Musk is being sued by Twitter investors claiming he manipulated the company’s stock price to go down.
The CEO of electric carmaker Tesla is in the middle of a $44 billion takeover bid for the social media platform.
Twitter investors are suing Musk for damages claiming that Musk saved himself $156 million by failing to disclose that he had purchased more than 5% of Twitter by March 14.
The investors said Musk continued to buy stock after that, and ultimately disclosed in early April that he owned 9.2% of the company, according to the lawsuit, filed on Wednesday in San Francisco.
‘By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,’ said the investors.
Twitter is also being sued alongside Musk for not investigating Musk’s conduct, though investors are not seeking damages from the company.
The investors said the recent drop in Tesla’s stock has put Musk’s ability to finance his acquisition of Twitter in ‘major peril’ since he has pledged his shares as collateral to secure the loans needed to buy Twitter.
Tesla’s shares were trading at around $713 on Thursday afternoon, down from above $1,000 in early April.
The timing of Musk’s disclosure of his stake has already triggered an investigation by the US Securities and Exchange Commission (SEC), the Wall Street Journal reported earlier this month.
The SEC requires any investor who buys a stake exceeding 5% in a company to disclose their holdings within 10 days of crossing the threshold.
The investors also said public criticism by Musk of the company, including a May 13 tweet stating the buyout was ‘temporarily on hold’ until Twitter proved that spam bots accounted for less than 5% of its users, amounted to an attempt to further drive the share price down.
On Wednesday, Musk pledged an additional $6.25 billion in equity financing to fund his Twitter bid, a sign he is still working to complete the deal.
While this lawsuit does not seek to stop Musk’s takeover, investors are asking for an unspecified amount of punitive and compensatory damages.
Metro.co.uk has reached out to Twitter for comment.