Twitter shareholders sue Elon Musk and Twitter over chaotic deal

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Twitter shareholders are suing Elon Musk, and Twitter itself, for their handling of a chaotic acquisition process that is still ongoing and has contributed to volatile swings in the company’s stock price.

The CEO of Tesla and SpaceX revealed a large stake in Twitter on April 4 and, 10 days later, offered a takeover for $44 billion, or $54.20 per share. He both sold and pledged some of his Tesla holdings as collateral for loans to fund the deal.

Since Musk’s takeover bid, Twitter’s share price has fallen more than 12% and Tesla’s by about 28% amid a broad tech stock sell-off. Tesla shares were down more than 40% at the end of Wednesday’s session since Musk first revealed his stake.

In a proposed class action lawsuit filed Wednesday, Twitter shareholders allege Musk violated California corporate laws on multiple fronts and, in doing so, engaged in market manipulation.

In a potential breach, they claim Musk benefited financially by delaying required disclosures about his Twitter stake and temporarily concealing his plans in early April to become a member of the social network’s board of directors.

Musk also took stock on Twitter, the complaint says, when he knew inside information about the company based on private conversations with board members and executives, including former CEO Jack. Dorsey, a longtime friend of Musk, and Silver Lake co-CEO Egon Durban. , a Twitter board member whose company had previously invested in SolarCity before Tesla acquired it.

Dorsey officially resigned from Twitter’s board on Wednesday. Shareholders voted not to reinstate Durban.

The proposed lawsuit also argues that Musk violated California laws by casting doubt on whether he would close the deal after signing the purchase agreement.

Earlier this month, Musk said he was putting the Twitter acquisition “on hold” to learn more about inauthentic activity on the platform, including information about fake or rogue accounts. .

The shareholder complaint added that its rebukes about the “bots” were part of a scheme to negotiate a better price or kill the deal.

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“Musk continued to make statements, send tweets, and engage in conduct intended to create doubt about the deal and to drive Twitter stock down significantly to create leverage that Musk hoped to use to back out of the deal. the purchase or to renegotiate the buyout price up to 25%, which, if realized, would result in an $11 billion reduction in the buyout consideration,” the complaint states.

California law requires state corporations to exclude board members from voting on proposals if they have engaged in any form of misconduct relevant to or related to those proposals.

Twitter declined to comment. Musk did not return requests for comment.

The case, Heresniak v. Musk et al, was filed in a court in the Northern District of California and the shareholders are asking for a jury trial. The shareholder complaint is subject to further review.

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