On Wednesday night, a new complaint was filed in federal district court in San Francisco on behalf of Twitter stockholders against Elon Musk, alleging that the Tesla CEO willfully manipulated the company’s stock for personal advantage.
The complaint focuses on Musk’s behavior after signing the acquisition agreement with Twitter’s board on April 25th, specifically his recent declaration that the deal “cannot move forward” without further information concerning automated accounts on the network.
According to the complaint, “Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down significantly in order to create leverage that Musk hoped to use to either back out of the purchase or re-negotiate the buyout price” after signing the agreement.
“As outlined below, Musk’s conduct was and continues to be illegal, in violation of the California Corporations Code, and contrary to the contractual obligations he committed to in the arrangement,” according to the complaint.
The case is a proposed class action brought by a small group of shareholders but seeks damages to be distributed to everyone who owns stock in the corporation.
While Musk’s actions are uncommon, there has been no evident attempt by the Tesla CEO to cancel or renegotiate the agreement. Nonetheless, the accusations in the complaint are supported by Twitter’s shares, which continue to trade significantly below the agreed-upon acquisition price. As of press time, Twitter shares were trading below $40, showing market uncertainty that the purchase will close at the agreed-upon price of $54.20.
Notably, the complaint requests that the court grant injunctive relief, which may potentially compel Musk to purchase Twitter at the agreed-upon amount.
Uncertainty surrounding Musk’s public pronouncements has already had a significant influence on the takeover proposal, driving down Tesla shares to the point where Musk had to abandon attempts to acquire finance through loans against his company holdings. Musk announced earlier this week to the Securities and Exchange Commission that he will contribute an extra $6 billion in stock capital to compensate for the expired loans.
