Elon Musk has been sued by a Twitter shareholder accusing Tesla’s CEO of criticizing the company he agreed to buy and casting doubt on the deal to drive down Twitter’s value.
The proposed class action lawsuit, filed Wednesday in the US District Court for the Northern District of California, alleges that Musk intended to lower Twitter’s stock price because he wants to walk away from the deal or negotiate a lower purchase price. .
The lawsuit, which also includes Twitter, argues that Musk’s attacks violated the non-disparagement and non-disclosure clauses of his contract with the company.
“Musk proceeded to make statements, tweet, and engage in conduct designed to cast doubt on the deal and substantially reduce Twitter’s actions to create leverage that Musk hoped to use to back out of the purchase or to renegotiate the deal. purchase price by up to 25% which, if achieved, would result in an $11 billion reduction in purchase consideration,” the lawsuit states.
“Musk’s conduct was and remains unlawful, in violation of the California Corporations Code and contrary to the contractual terms he agreed to in the deal,” the lawsuit adds.
Musk reached a deal last month to buy the social media company for $44 billion, but has since repeatedly publicly complained about Twitter. In particular, he has questioned the number of bots or spam accounts, which according to Twitter amount to less than 5% of accounts. Musk wildly speculated at a tech conference earlier this month that the percentage of fake accounts could be as high as 95%.
He also announced that he was putting the purchase on “hold”, although he insisted that he was still “committed” to the deal. He later said that a lower purchase price was not out of the question.
Since Musk’s takeover bid, and the complaints, Twitter’s share price is down more than 12% and Tesla’s is down about 28%.
Twitter shares closed Thursday at $39.54, 27% below Musk’s $54.20 per share offer to buy the company.
Musk was using Tesla stock to fund the Twitter purchase. But since then he has increased his personal funding by more than $6 billion and has secured an additional $6.25 billion in equity funding, according to regulatory filings Wednesday.
The suit also accuses Musk of insider trading by buying shares while talking to company board members and failing to meet the legally required deadline to report to the Securities and Exchange Commission that he had acquired a 5% stake. in the company. The SEC has sent a letter to Musk demanding an explanation for missing the deadline.
Musk could not be reached for comment, and he has not released a statement on the lawsuit.