Former shareholders of company X have gained the opportunity to initiate a class action lawsuit against its owner, Elon Musk. The reason stems from Musk’s actions during the acquisition of shares, particularly the delay in reporting the acquisition of a significant stake in the company, which the plaintiffs believe affected the market situation.
This is reported by Finway
Investors’ Lawsuit and Financial Losses
The essence of the claims is that Elon Musk did not inform regulators about acquiring more than 5% of the shares of company X within the legally mandated timeframe, and only did so 11 days after the actual purchase. In the official announcement, the stake was immediately noted as being 9.2%. Investors believe that this delay allowed Musk to acquire or hold shares at a more favorable price, while other shareholders sold their securities without knowing the true extent of his involvement in the company.
“The plaintiffs note that the delay may have allowed Musk to acquire or retain shares at a lower price. As a result, other shareholders sold their securities without knowing the exact size of his stake.”
Estimates suggest that the potential amount of lost profits for investors could exceed $200 million. Additionally, the plaintiffs emphasize that Musk’s public statements regarding the creation of an alternative social network and his reactions to offers to purchase the company may have influenced market sentiment and the decisions of other shareholders.
Court’s Position and Musk’s Defense
Elon Musk’s defense emphasizes that there is no clear evidence that investors made decisions based on his later disclosure of his stake in the company. Nevertheless, a federal judge in New York ruled that at the initial stage of the case, it is impossible to rule out the impact of the delay in information disclosure on the market value of the shares. Thus, the court allowed the consideration of the class action lawsuit by investors against Elon Musk.
It was previously reported that Elon Musk could become the world’s first trillionaire thanks to Tesla, where he serves as CEO and is the largest shareholder. Tesla has developed an unprecedented incentive package for its leader, which has already become iconic in corporate history.