Elon Musk is sued by shareholders over delay in disclosing Twitter stake

div classBodysc17zpet90 cdBBJodivpBy Jonathan Stempelp

pNEW YORK Reuters – Elon Musk was sued on Tuesday by former Twitter Inc shareholders who claim they missed out on the recent runup in its stock price because he waited too long to disclose a 9.2 stake in the social media company.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pIn a proposed class action filed in Manhattan federal court, the shareholders said Musk, the chief executive of electric car company Tesla Inc, made “materially false and misleading statements and omissions” by failing to reveal he had invested in Twitter by March 24 as required under federal law.p

pTwitter shares rose 27 on April 4, to 49.97 from 39.31, after Musk disclosed his stake, which investors viewed as a vote of confidence from the worlds richest person in San Franciscobased Twitter.p

pFormer shareholders led by Marc Rasella said the delayed disclosure let Musk buy more Twitter shares at lower prices, while defrauding them into selling at “artificially deflated” prices.p

pThe lawsuit seeks unspecified compensatory and punitive damages.p

pA lawyer for Musk had no immediate comment. Tesla is not a defendant.p

pU.S. securities law requires investors to disclose within 10 days when they have acquired 5 of a company, which in Musks case would have been March 24.p

pTwitter announced on April 5 that Musk would join its board of directors, but this week said he had decided not to.p

pBy not joining the board, Musk, a prolific Twitter user, can keep buying shares without being bound by his agreement with the company to limit his stake to 14.9.p

pSome analysts have suggested Musk could push Twitter to make changes, or even pursue an unsolicited bid for the company.p

pRasella said he sold 35 Twitter shares for 1,373, or an average price of 39.23, between March 25 and 29. Musk is worth 265.1 billion, according to Forbes magazine.p

pThe case is Rasella v Musk, U.S. District Court, Southern District of New York, No. 2203026.p

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pp Reporting by Jonathan Stempel in New York editing by Richard Pullinp

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