Twitter’s shareholders have sued billionaire Elon Musk, alleging that his comments after the $44 billion merger agreement manipulated the price of the company’s shares downward. Musk was accused by the stockholders in the complaint of making intentionally unfavorable statements about Twitter in order to depress its stock price.
Musk allegedly purposely pushed down the company’s shares to gain a better price, according to the lawsuit, which was filed in federal district court for Northern California on Wednesday.
According to them, the billionaire’s ruse worked, as Twitter’s value has dropped by $8 billion since the Buyout was disclosed. Before agreeing to the $44 billion transaction, Musk was aware of the bot problem and other challenges that Twitter was facing, according to the sources.
Musk had placed the sale on hold last week pending the determination of the real amount of bots on Twitter, which the business estimated to be fewer than 5%.
The shareholders while narrating the cause of the lawsuit said: “On April 25, 2022, Twitter, Inc. announced that it had agreed to sell itself to Elon Musk for $54.20 per share, or approximately $44 billion (the “Buyout” or “Proposed Buyout”). Musk negotiated the Twitter Buyout over the weekend of April 23-24, 2022 without carrying out any due diligence.
- “The Buyout is only conditioned on approval of Twitter’s shareholders at a meeting to be scheduled this summer, regulatory approval, and closing of the Buyout by October 24, 2022. Before agreeing to buy Twitter for $44 billion, Musk, one of the world’s richest individuals valued at $276 billion according to the Bloomberg Billionaires Index, and a sophisticated businessman with a phalanx of lawyers and investment bankers, according to the press, specifically agreed to waive detailed due diligence as a condition of the merger agreement.”
- “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. 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.
- “Musk and his team were also well aware of a $809.5 million settlement Twitter entered into in September 2021, in a securities fraud class action alleging Twitter overstated its user numbers and growth rate. All the documents from that case were publicly available to Musk, including a website containing, among other things, the Court’s order denying Twitter’s motion for summary judgment.
- “Because Tesla’s stock is worth much less now than when Musk agreed to buy Twitter, Musk is at risk of a margin call or a requirement to put up more cash. Musk quickly acted to attempt to mitigate these personal risks to himself by engaging in unlawful conduct that moved the price of Twitter’s stock down,” they added.
- The shareholders further alleged that “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 by as much as 25% which, if accomplished, would result in an $11 billion reduction in the Buyout consideration.
- “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. Musk’s market manipulation worked — Twitter has lost $8 billion in valuation since the Buyout was announced.”
What you should know
- The billionaire, who has put his $44 billion deal to buy the company on hold, believes that there are more spam or bot accounts on Twitter than the company has claimed.
- Testing the claim through his over 93 million followers on Twitter, Musk posted: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?”
- He then provided two options for people to vote: One, laughter emoji for real humans, and the second option a bot icon.
- After 13 hours of the poll, over 1.3 million Twitter users had voted with 52.5 per cent in favour of humans and 47.5 per cent in favour of bots, as of the time of filling this report. The poll is to last for 24 hours.