Twitter Stakeholder Lawsuit Accuses Elon Musk Of Shady Stock Price Manipulation

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Elon Musk and Twitter have both been named in a lawsuit that alleges the Tesla CEO attempted to create doubt about his plans to purchase the social media platform in order to get a lower price. Shareholder William Heresniak from Virginia states in the lawsuit that he is doing so on behalf of all Twitter stockholders.

In a lawsuit filed Wednesday in California federal court, Musk is alleged to have faced "a unique and multi-billion-dollar problem" after he pledged his Tesla stock as collateral for a $12.5 billion loan to help finance the Twitter buyout. Since the deal was announced, Tesla stock has remained down and was still off by more than 40% as of the end of trading on Wednesday. Twitter's share price has also dropped more than 12% since the deal was announced. At one point, Musk tweeted that the deal was "temporarily on hold" due to the uncertainty of the amount of bots on the platform.

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Image Credit: Bottini & Bottini Inc. via Yahoo Finance

It is noted in the lawsuit that Musk was at risk of a margin call or a requirement to put up more cash, and therefore "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."

Musk is alleged to have made statements, sent tweets, and engaged in conduct that was designed to create a cloud of doubt that the deal would actually happen, all in order to drive Twitter's stock price down substantially. It goes on to point out that Musk hoped by bringing down the stock price, he could effectively renegotiate the buyout price by as much as 25%, or back out of the deal completely. If Musk were able to renegotiate at a 25% reduction in price, it would amount to an $11 billion reduction in the buyout price.

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Image Credit: Bottini & Bottini Inc. via Yahoo Finance

The tech billionaire is also alleged to have delayed his disclosure of his stake in Twitter in order to manipulate the market and bring Twitter stock to an artificially low price. The delay in the Tesla CEO's disclosure has already triggered an investigation by the U.S. Securities and Exchange Commission (SEC), the Wall Street Journal reported earlier this month.

Included in the lawsuit are numerous tweets that Musk has sent on his official Twitter account. The tweets include where the billionaire stated that the deal was "temporarily on hold" pending details surrounding the calculation of the actual number of spam/fake accounts on the platform. Legal experts have stated these tweets by Musk may prompt the platform to sue Musk to collect a $1 billion breakup fee or force him to make good on his offer.

In an emailed statement to Law360, Francis A. Bottini Jr., of Bottini & Bottini Inc., counsel for Heresniak, said, "In light of the plunging value of the Tesla stock he pledged as collateral for $12.5 billion in loans, Musk announced yesterday that he has abandoned such loans and is now seeking other investors such as Jack Dorsey to make equity contributions." Bottini added, "Meanwhile, Musk continues to disparage the company he wants to buy for $44 billion in an effort to renegotiate the purchase price."

As far as Dorsey goes, it was announced a couple days ago that the Twitter co-founder is stepping down from the company's board. "As we shared back in November, Jack would be leaving the Board when 'his term expires at the 2022 meeting of stockholders,'" remarked a Twitter spokesperson in a statement to The Hill.

Top Image Credit: Daniel Oberhaus via Flickr