The investors said that Musk saved himself $156 million by not telling them that he had bought more than 5% of Twitter by March 14.
They asked to be recognized as a group and to get punitive and compensatory damages in an amount that couldn’t be said.
Reuters says that they also named Twitter as a defendant, saying that the company had a duty to look into Musk’s actions, even though they are not looking for money from Twitter.
The lawsuit, which was filed on Wednesday in federal court in San Francisco, says that the investors said Musk kept buying stock after that and finally said in early April that he owned 9.2% of the company.
“By waiting to tell the market about his stake in Twitter, Musk manipulated the market and bought the Twitter stock at a price that was too low,” the investors, led by William Heresniak of Virginia, said.
Neither Musk nor his lawyer answered right away when asked for a comment. Twitter didn’t want to say anything.
The investors said that the recent drop in Tesla’s stock puts Musk in “major danger” of not being able to buy Twitter because he used his shares as collateral to get the loans he needs to do so.
Yesterday, Tesla’s shares were selling for around $713, down from more than $1,000 at the beginning of April.
Earlier this month, the Wall Street Journal reported that the U.S. Securities and Exchange Commission (SEC) was already looking into Musk’s disclosure of his stake and when he did it.
Any investor who buys more than 5% of a company must tell the SEC about their holdings within 10 days of crossing the 5% mark.
The investors also said that Musk’s public criticism of the company, like when he tweeted on May 13 that the buyout was “temporarily on hold” until Twitter proved that spam bots made up less than 5% of its users, was an attempt to make the share price go down even more.
Musk promised an extra $6.25 billion in equity financing on Wednesday to help pay for his bid for Twitter. This shows that he is still working to close the deal.
A Florida pension fund sued Musk earlier this month in Delaware Chancery Court. They want to stop the deal because some other big Twitter shareholders are supporting the buyout, which is against Delaware law. The lawsuit filed by Heresniak is not meant to stop the takeover.
