Controversial billionaire Elon Musk is being sued by Twitter shareholders hoping to gain approval for a class action lawsuit over allegations he manipulated the share price for his own gains.
The suit, filed in the Northern District of California, largely focuses on Musk's behaviour since the announcement of his intention to buy Twitter in late April.
However it also mentions he saved approximately US$156 million by not disclosing his stake as quickly as he was legally obliged to, already the subject of a separate lawsuit.
According to the lawsuit, the Tesla CEO "had a unique and multi-billion-dollar problem".
"Musk pledged his Tesla stock as collateral for a US$12.5 billion loan to finance the buyout of Twitter, however Tesla's shares have declined by over 37 percent since the announcement of the buyout.
That left Tesla's stock worth much less than it was worth when he agreed to buy the social media platform, leaving Musk "at risk of a margin call or a requirement to put up more cash".
The billionaire announced yesterday he was putting up more of his own money and removing the loans against his Tesla shares from the offer.
"Musk quickly acted to attempt to mitigate these personal risks to himself by engaging in unlawful conduct that moved the price of Twitter's stock down.
"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 in order to create leverage that Musk hoped to use."
That would lead to a reduction in the buyout price by as much as 25 percent, or around US$11 billion, the lawsuit stated.
"Musk's conduct was and continues to be illegal, in violation of the California Corporations Code, and contrary to the contractual terms he agreed to in the deal," the lawsuit continued.
"Musk's market manipulation worked - Twitter has lost US$8 billion in valuation since the buyout was announced."
The lawsuit also raised questions about his motivation for announcing he was pausing the purchase because he didn't believe Twitter was accurately disclosing the number of bot accounts on the platform.
"At the time, Musk was well aware that Twitter had a certain amount of 'fake accounts' and accounts controlled by 'bots' and had in fact settled a lawsuit based on the fake accounts for millions of dollars," the lawsuit said.
"Musk had tweeted about that issue at Twitter several times in the past, prior to making his offer to acquire Twitter with full knowledge of the bots."
SHORTING STOCK
Musk and his team were also aware of a US$809.5 million settlement Twitter had made in September 2021 as part of a fraud class action alleging the platform overstated its user numbers and growth rate, the lawsuit said.
According to the plaintiffs, the billionaire knew he was buying Twitter at a sale price, his offer of US$54.20 a share below the 2021 high of US$71.69 on July 23, 2021. That had declined to just US$32.42 on March 7, 2022.
The billionaire's tweets also "substantially harmed" Twitter's employees, after two senior managers were fired and a hiring freeze was announced after he put the buyout "on hold".
His behaviour also encouraged others to 'short' Twitter's stock, citing Hindenburg as an example who made a "large profit" by doing so.
The suit also alleges Musk's announcement he was switching from voting Democrat to Republican was to "further excite the media of his conduct".
The complaint asks for injunctive relief by the court, part of which could force Musk to purchase Twitter at the agreed-upon price.
Twitter has declined to comment on the lawsuit, according to multiple reports, while neither Musk or his lawyer immediately commented, Reuters said.
