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CLASS ACTION: Tesla CEO Elon Musk facing lawsuit over his latest Twitter stunt

CLASS ACTION: Tesla CEO Elon Musk facing lawsuit over his latest Twitter stunt

CLASS ACTION: Tesla CEO Elon Musk facing lawsuit over his latest Twitter stunt
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On April 4th, news of Tesla CEO Elon Musk’s majority stake in Twitter went viral, sending shockwaves around the social media world – and the Twitter boardroom — with investors crying foul.

A filing with the SEC disclosed that Musk had acquired 9.2% of the popular social media platform, equal to 73,000,000 shares, officially making him the largest individual shareholder in the company. For a short while, at least.

Since then, Vanguard has acquired 10.3% to take the helm. That’s almost five times the 2.3% owned by Twitter founder, Jack Dorsey.

But it was ten days too late, costing investors who sold their shares in Twitter between March 24th — the day Musk should have disclosed— and the April 4th date that he actually did disclose his purchases an estimated $165 million. This situation prompted attorney Jacob Walker to file suit in New York Federal Court on behalf of aggrieved shareholders.

Section 12 of the Exchange Act “establishes the thresholds at which an issuer is required to register a class of securities with the Securities and Exchange Commission (the “SEC”)”. That threshold is 5%.

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Musk has been known to manipulate stock prices with both his words and his actions. He’s done it with his own company, Tesla, repeatedly landing him in hot water with the SEC. His recent actions spurred the commission to investigate Musk and his younger brother – restauranteur, Kimbal Musk – for a tweet the elder brother posted on November 6, 2021, asking his tens of millions of Twitter followers if he should sell 10% of his Tesla stake. That, in and of itself, doesn’t equate to insider trading. It’s what happened before – and after — that is considered questionable.

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The day before the tweet, Kimbal sold $108M worth of Tesla shares. The day after the tweet, Tesla stock dropped dramatically.

That tweet violated an agreement Musk entered into with the SEC in 2018. It was an agreement that included a $40M fine, Musk’s resignation as Chair of the Tesla board, and a stipulation that the social-media-stunting-keyboard-warrior had to have all tweets pre-approved by an attorney. Because of what, you may ask? You guessed it – a tweet.

The $40M Tweet:

Musk and Tesla split the baby, each paying $20M of the penalty.

Yet, despite his constant legal dance with the Securities and Exchange Commission, the craven billionaire can’t seem to help himself.

Musk purchased 620,000 shares of Twitter for $36.83 a share on January 31st.  He continued to buy in bulk at prices far lower than the $50 per share price the stock reached after Musk filed the required form, 13(G), with the SEC.

On the 4th, Musk signed an agreement with Twitter’s current CEO, Parag Agrawal, to sit on the board.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

It was confirmed by Agrawal via Twitter:

Less than a week later the honeymoon would be over. Musk wouldn’t be joining the board after all. This sudden switch left many asking “why?” Could it be the mandatory background check, or perhaps that board members are capped at owning no more than 14.9% of shares and are obligated to make decisions in the best interest of the company?

This would definitely present a problem because the only interest Musk seems to care about, in many observers’ opinions, is his own and anything that grows his portfolio.

After the Twitter board fiasco, Musk announced on Twitter that he had made an offer to buy the “bluebird” app.

An amended copy of form 13(D) was filed with the SEC on April 13th. Included was correspondence to Twitter’s Chairman of the Board, Bret Taylor offering $54.20 a share or roughly $43M.  This is what it said:

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.  However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed into a private company. As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter, and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential.  I will unlock it.”

Musk recently criticized Mark Zuckerberg for the controlling interest he has in social media apps Facebook, Instagram, and WhatsApp, saying that once he was the owner of Twitter, there would be transparency. He even vowed to make Twitter’s code for its proprietary algorithm available to the public.

Musk hasn’t grasped the fact that the major difference between him and Zuckerberg is that Zuckerberg founded Facebook. It’s HIS company in many ways.

Musk’s declaration that his offer to buy Twitter is solely about “protecting” free speech is in stark contradiction to his offer to pay 19 yr old Jack Sweeney, college student and creator of popular Twitter account Elon Musk’s Jet, to delete the bot controlled account. Elon Musk’s Jet tracks the plane’s take-off, landing, and flight activity.

Sweeney declined the offer in Nov. of 2021. According to NBC News, the University of Central Florida freshman countered with a $50,000 offer and request for an internship.

Musk didn’t respond and blocked Sweeney shortly after the request.

Not known for his patience, Musk followed up the letter to Twitter’s Chairman with a text – reiterating his desire to make Twitter private – and a call in which Musk told Taylor that he “is not playing the back-and-forth game” and “I have moved straight to the end.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some people, like Mark Cuban, the billionaire owner of the NBA team, the Dallas Mavericks, think that Musk is just trolling and making a money grab. According to Cuban:

“His filing w/the SEC allows him to say he wants to take a company private for $54.20, Price goes up. His shares get sold. Profit.”

Trolling or not, the offer alone has made Twitter employees uneasy. They view the over-the-top dramatics, in just a week, as chaotic.

Focus week is a four-day workweek where non-essential meetings are canceled at the company with the goal of creating an environment of clear thinking and focus without distraction.

But it’s this tweet, that I feel sums it up best:

Halli speaks for all of us right now.

Follow Ty Ross on Twitter @cooltxchick

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