Lawsuit alleges Musk drove Twitter stock down

Elon Musk is being sued by Twitter investors for driving down the social network's share price in an effort to cut the cost of his Us$44-billion takeover.

Musk has illegally attempted to “mitigate personal (financial) risks to himself by engaging in unlawful conduct that moved the price of Twitter's stock down,” according to a lawsuit.

William Heresniak filed the lawsuit in California on behalf of himself and other Twitter shareholders against the Tesla billionaire and the social media company. The lawsuit claims that Musk is making false statements and engaging in “market manipulation” to negotiate a cut-price deal.

Twitter shares have fallen heavily in recent weeks, despite Musk agreeing to buy the company for US$54.20 a share, after he said he had put the deal on hold and suggested he should get a discount due to the number of fake accounts on the service.

On Friday it emerged that the U.S. Securities and Exchange Commission had written to Musk asking whether he had properly disclosed his stake and whether he was a “passive” investor as he had originally stated. The letter was dated April 4, before the billionaire launched his takeover bid.

Heresniak wants the lawsuit designated a class action, allowing other Twitter shareholders to join it, and for Musk to compensate shareholders for the declining value of their investment.

It also seeks damages from Musk for failing to disclose his status as a Twitter investor earlier in March. He only revealed he had bought a 9.2-per-cent stake in the company after the traditional deadline.

Musk and Twitter did not comment.