Twitter shareholders file complaint against Elon Musk, cite manipulation of company’s stock price

Elon Musk’s Twitter deal put the company on a rollercoaster ride, and that includes its stock price. The billionaire initially wanted to buy it for $44bn, but the recent issues between Musk and Twitter caused the Twitter stock price to dip. Twitter shareholders are not happy about that, leading to a lawsuit that claims Musk manipulated the company’s stock price to help him re-negotiate the buyout price.

“Musk’s false and disparaging statements have caused the spread between the $54.20 buyout price and Twitter’s stock price to exceed $15 per share, which is highly unusual,” the complaint states.

It is a proposed class action lawsuit pushed by a small number of shareholders, though financial compensation would benefit all stockholders. It was filed in federal district court in San Francisco last Wednesday night.

The complaint stresses that Musk’s actions and conduct affected Twitter’s stock. It states that after signing the purchase agreement with the board, “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 to either back out of the purchase or re-negotiate the buyout price.

“As detailed herein, 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.”

It can be recalled that Musk said in a recent tweet that the Twitter deal is temporarily on hold due to the issues of the number of fake accounts on the platform. The company reported that 5% of its first-quarter monetizable daily active users were bots, but independent researchers claim that the number could be at least 20%. This means one thing for Musk: buying Twitter at the initial deal price is too much. However, the lawsuit says that Musk was aware of the issue even before making the offer, making his recent tweets and actions suspicious and timed. 

“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 complaint reads. “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.”

As of writing, the trade for Twitter shares hit $39.52. This further makes it hard to believe that the agreed deal will close at $54.20. The complaint wants to address this by asking for an injunction to force Musk to have the Twitter share trading at the original agreement price.