Twitter shareholders filed suit on Wednesday against Elon Musk and Twitter, alleging that Musk violated California’s Corporation Code 25400 prohibiting market manipulation when he tweeted false and misleading statements surrounding the deal he made to buy Twitter — and claiming that it was all part of Musk’s attempt to secure a better and cheaper deal to control the social media giant. The shareholders gave examples like this tweet from May 13th.
On the weekend of April 23rd and 24th, Musk participated in negotiations with Twitter, and, on April 25th, a deal was announced. Musk would purchase the social media platform for an agreed-upon $54.20 a share. In addition, Musk agreed to a deal without doing his “due diligence” as the buyer – even signing a waiver to attest to that fact. This was highlighted in Section Four of the shareholder’s complaint:
“Before agreeing to buy Twitter for $44 million, Musk, one of the world’s richest individuals valued at $276 billion according to the Bloomberg Billionaires Index with a phalanx of lawyers and investment bankers, according to the press, specifically agreed to waive detailed due diligence as a condition of the merger agreement.”
The complaint also points to Musk’s false claims of “putting the deal on hold” by saying:
“Musk’s tweet (and public statement) was misleading and constituted an effort to manipulate the market for Twitter shares as he knew all about the fake accounts. The statement was false because the buyout was not, in fact, ‘temporarily on hold.’ There is nothing in the contract that allows Must to put the deal ‘temporarily on hold.’ Moreover, Musk’s statement was misleading because it stated or implied that Musk’s obligation to consummate the buyout was conditioned on his satisfaction with due diligence to determine whether ‘spam/fake accounts do indeed represent less than 5% of users.’ This was false because Musk had specifically waived detailed due diligence as a condition precedent to his obligations under the buyout contract.”
The complaint also asserts that Musk was well aware of the significant number of bots on the app. It points out that after settling a multi-million dollar suit over the Bluebird’s “fake accounts”, Musk “tweeted about that issue at Twitter several times in the past, prior to making his offer to acquire Twitter with full knowledge of the bots.” That suit was settled almost seven months before Musk’s offer in September of 2021, yet the world’s richest troll still tweeted this:
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.
— Elon Musk (@elonmusk) May 17, 2022
The shareholder suit debunks Musk’s attempt at gaslighting in Section Five of the suit:
“Musk and his team were well aware of $809.5 million settlement Twitter entered into in September 2021, in a securities fraud class action alleging Twitter overstated its user numbers and growth rate – in re Twitter Inc, Securities Litigation, 16-cv-05314, U.S. District Court, Northern District of California (San Francisco). All the documents from that case were publicly available to Musk, including a website (twittersecuritieslitigation.com) containing, among other things, the Court’s order denying Twitter’s motion for summary judgment.”
Here is the central complaint in the lawsuit, formally known as Heresniak vs. Musk and Twitter:
“Musk’s wrongful conduct has not only substantially harmed Twitter’s shareholders by causing Twitter’s stock to crater by approximately 25%, but it has also substantially harmed Twitter’s employees.”
The complaint refers to the toxic and anxiety-filled environment employees are now facing with lay0ffs, firings, and restructuring at the social media company.
Although former Twitter CEO Jack Dorsey is not named as a defendant in the lawsuit, the complaint lists conversations between him and Elon Musk, alleging collusion between the two longtime friends. Dorsey resigned from the Twitter board the day the suit was filed. Another Twitter board member, Egon Durban, was removed in connection to this suit as well.
Musk faces multiple lawsuits in connection to his sketchy-at-best market manipulation and social media activities. But the filing of this class action suit has confirmed what many of us already knew: this was never about Twitter.
Musk knew about the bots. He signed a waiver of due diligence and all this social media showboating was performative. Unfortunately, like with all sociopathic behavior, innocent people get caught up in the process and, more times than not, end up on the losing end of a billionaire’s battle with his own ego.
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