Twitter Shareholders Sue Elon Musk Over ‘Deflated’ Stock Price

Twitter (TWTR) shareholders have filed a class action lawsuit accusing Elon Musk of
deliberately lowering the price of the social media company’s stock.

Specifically, Twitter shareholders accuse Musk of engaging in “unlawful conduct” aimed at
sowing doubt about his bid to buy the social media giant.

The lawsuit filed in the U.S. District Court for the Northern District of California claims that the
billionaire chief executive officer (CEO) of Tesla (TSLA) has sought to drive down Twitter’s stock
price because he wants to walk away from the deal or negotiate a lower purchase price.

San Francisco-based Twitter is also named as a defendant in the lawsuit, which seeks class
action status as well as shareholder compensation for damages.

Elon Musk last month offered to buy Twitter for $44 billion U.S., but later said the deal can’t go
forward until the company provides information about how many accounts on the platform are
spam or bots.

The lawsuit notes, however, that Musk waived due diligence for his “take it or leave it” offer to
buy Twitter. That means he waived his right to look at the company’s non-public finances.

In addition, the problem of bots and fake accounts on Twitter is nothing new. The company paid
$809.5 million U.S. last year to settle claims it was overstating its growth rate and monthly user
figures. Twitter has also disclosed its bot estimates to the U.S. Securities and Exchange
Commission (SEC) for years, while also cautioning that its estimate might be too low.

To fund some of the acquisition, Musk has been selling Tesla stock and shares in the electric
carmaker have lost nearly a third of their value since the deal was announced on April 25.

In response to the plunging value of Tesla’s shares, the Twitter shareholders’ lawsuit claims
Musk has been denigrating Twitter, violating both the non-disparagement and non-disclosure
clauses of his contract with the company.

“In doing so, Musk hoped to drive down Twitter’s stock price and then use that as a pretext to
attempt to re-negotiate the buyout,” the lawsuit states.

Twitter’s stock closed yesterday (May 26) at $39.52 U.S., which is 27% below Musk’s offer price
of $54.20 U.S. per share.

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