9:53 am, May 27, 2022
Tesla boss Elon Musk has been dealt a fresh blow in his hopes to takeover Twitter after shareholders filed a lawsuit against him, alleging ‘unlawful conduct’.
The shareholders have launched legal action in the US District Court for the Northern District of California claiming that Musk has sought to bring down Twitter’s stock price.
The lawsuit says that the billionaire has taken the action in order to negotiate a substantially lower purchase price or walk away from the deal.
Twitter is seeking class action status as well as compensation for damages.
The news comes after reports that Musk’s £35bn takeover of Twitter had hit the rocks due to concerns over spam and bot accounts.
The lawsuit note that Musk waived due diligence meaning he has no rights to look at the company’s non-public finances.
To fund some of the acquisition, Musk has been selling Tesla stock, and shares in the electric carmaker have lost nearly a third of their value since the deal was announced on April 25.
In response to the plunging value of Tesla’s shares, the Twitter shareholders’ lawsuit claims Musk has been denigrating Twitter, violating both the non-disparagement and non-disclosure clauses of his contract with the company.
Twitter’s shares closed Thursday at 39.54 dollars, 27 per cent below Musk’s 54.20 dollars offer price.
Before announcing his bid to buy Twitter, Musk disclosed in early April that he had bought a nine per cent stake in the company.
However, the lawsuit says Musk did not disclose the stake within the timeframe required by the Securities and Exchange Commission.
It also claims that his eventual disclosure of the stake to the SEC was ‘false and misleading’ because he used a form meant for ‘passive investors’ — which Musk at the time was not, because he had been offered a position on Twitter’s board and was interested in buying the company.
Musk was recently forced to deny claims that the takeover was his taking attention away from Tesla.
Car Dealer reported this week that Tesla buyers are currently facing a two year wait for their cars. Read more here.
