Elon Musk's huge Twitter investment took a new twist this week with the filing of a lawsuit alleging that the billionaire illegally delayed disclosing his stake in the social media company so he could buy more shares at lower prices.
The complaint in New York federal court accuses Mr Musk of violating a regulatory deadline to reveal he had accumulated a stake of at least 5%.
Instead, according to the complaint, Mr Musk did not disclose his position in Twitter until he had almost doubled his stake to more than 9%.
That strategy, the lawsuit alleges, hurt less wealthy investors who sold shares in the San Francisco company in the nearly two weeks before Mr Musk acknowledged holding a major stake.
Mr Musk's regulatory filings show that he bought a little more than 620,000 shares at 36.83 dollars apiece on January 31 and then continued to accumulate more shares on nearly every single trading day through to April 1.
Mr Musk, best known as CEO of electric car maker Tesla, held 73.1 million Twitter shares as of the most recent count on Monday. That represents a 9.1% stake in Twitter.
The lawsuit alleges that by March 14, Mr Musk's stake in Twitter had reached a 5% threshold that required him to publicly disclose his holdings under US securities law by March 24. Mr Musk did not make the required disclosure until April 4.
That revelation caused Twitter's stock to soar 27% from its April 1 close to nearly 50 dollars by the end of April 4's trading, depriving investors who sold shares before Mr Musk's improperly delayed disclosure the chance to realise significant gains, according to the lawsuit filed on behalf of an investor named Marc Bain Rasella.
Mr Musk, meanwhile, was able to continue to buy shares that traded in prices ranging from 37.69 dollars to 40.96 dollars.
The lawsuit is seeking to be certified as a class action representing Twitter shareholders who sold shares between March 24 and April 4, a process that could take a year or more.
Jacob Walker, one of the lawyers that filed the lawsuit against Mr Musk, told the Associated Press that he had not reached out to the Securities and Exchange Commission about Mr Musk's alleged violations about the disclosure of his Twitter stake.
"I assume the SEC is well aware of what he did," Mr Walker said.
An SEC spokesperson declined to comment.
Mr Musk did not immediately respond to a request for comment posted on Twitter, where he often shares his opinion and thoughts.
Mr Musk has since said he wants to buy Twitter outright.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here