A new lawsuit on behalf of Twitter shareholders was filed against Elon Musk in federal district court in San Francisco on Wednesday night, alleging that the Tesla CEO has actively manipulated the company’s stock for personal gain.
The complaint focuses on Musk’s conduct since signing the purchase agreement with Twitter’s board on April 25th, particularly his recent statement that the deal “cannot move forward” without more information about automated accounts on the platform.
After signing the agreement, the complaint alleges, “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.”
“Musk’s conduct was and continues to be illegal”
“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,” the complaint continues.
The lawsuit is a proposed class action brought by a small group of shareholders but seeking damages that would be distributed among anyone holding the company’s stock.
Twitter declined to comment on the case.
While Musk’s behavior is unusual, there’s been no clear attempt from the Tesla CEO to cancel or renegotiate the deal. Nonetheless, the complaint’s claims are borne out by the unusual behavior of Twitter’s stock, which continues to trade significantly below the agreed-upon buyout price. As of press time, Twitter shares were trading below $40, reflecting significant market skepticism that the deal will close at $54.20 as agreed.
Notably, the complaint asks for injunctive relief by the court, which could potentially force Musk to purchase Twitter at the agreed-upon price.
Uncertainty around Musk’s public statements has already had a material impact on the buyout proposal, driving down Tesla stock to the point that Musk had to abandon plans to secure financing through loans against his holdings in the company. Musk told the Securities and Exchange Commission earlier this week that he will provide an additional $6 billion in equity financing to make up for the expired loans.