Today, investors in Twitter (NYSE:TWTR) have yet another leg in the Elon Musk buyout drama to follow. Twitter investors, via The Portnoy Law Firm, have launched a class-action lawsuit against Elon Musk, alleging Musk engaged in stock manipulation. By buying shares at an artificially low price, and failing to disclose his 5% stake within the window stipulated by the U.S. Securities and Exchange Commission (SEC), Twitter investors allege the celebrity CEO enriched himself by more than $150 million.
This isn’t the first time allegations of the billionaire skirting (or breaking) securities laws have surfaced. Indeed, Musk is provocative and outspoken, walking the line between what is legal and what is gray area pretty successfully. Musk has defended himself against a defamation lawsuit, a lawsuit over Tesla’s acquisition of Solar City and a number of other lawsuits for his various businesses.
That said, Elon Musk’s $44 billion acquisition of Tesla will be much bigger than any of the previous take-private deals we’ve seen in some time. Shareholders may rightly be frustrated with the discount TWTR stock trades at relative to its acquisition price. Indeed, this lawsuit is independent of others that may arise regarding the ultimate price this deal closes at. The market certainly doesn’t seem to think $54.20 is in the cards.
Let’s dive into some of the key takeaways from this announced lawsuit.
What to Make of the Twitter Class-Action Lawsuit Against Elon Musk
The crux of the issue, that Musk has found a way to manipulate Twitter’s stock price downward and save himself some money by acquiring shares without proper disclosures early on in the process, has angered investors. Indeed, I can understand this frustration. There are some pretty clear securities laws in this regard, and Musk will likely have to settle on this matter.
However, it’s interesting that this lawsuit has been launched as a class-action, rather than by the SEC directly. For now, it appears shareholders are on their own, as Musk continues to do, well, whatever he wants.
Musk and his lawyer have yet to chime in on this lawsuit. On this front, I don’t expect we’ll hear anything in the near term. However, investors looking at this whole debacle have seen some wild volatility of late. I think this volatility is likely to continue. However, I have no idea what the outcome of this deal will ultimately be. Accordingly, I’m watching the fireworks happily from the sidelines.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
