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Twitter (TWTR) Musk Buyout Case
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S.D. New YorkCourt
Investors suspect that Elon Musk violated the SEC's 5% ownership disclosure rule, saving him $200 million in stock purchases. Due to the 10-day delay in disclosure, many investors who sold shares during this period, suffered.
- On April 4, Musk announced that he had acquired 9.2% of $TWTR for $2.64 billion although according to the SEC Rules disclosure must be made after overcoming the barrier of 5%.
- Investors who cross that line are required to file a form with the SEC revealing their stake within 10 days.
- Musk’s holdings topped 5% on March 14, securities filings show, meaning he should have disclosed his stake by March 24 under SEC rules.
- After March 24, Mr. Musk purchased roughly $513 million of stock at prices between $38.20 and $40.31 a share, according to a regulatory filing. The total buying spree made him Twitter’s largest individual shareholder with 9.2% of its shares.
While Musk was buying shares, other investors were selling shares without having all the information they should have. The difference in price between the sales from March 24 to April 4 with the closing price of shares on April 4 can be considered a loss caused by Mr. Musk's unfair practices.
It later emerged that a potential buyout of Twitter shares was to be financed by Morgan Stanley, with which Mr. Musk has long-standing ties. If it turns out that he consulted with the bank prior to beginning his purchases on January 31, 2022, the period should be extended at the starting point to January 31, as the bank is indirectly responsible for managing more than 8% of the company's shares and they can be considered related parties with Musk.
Failure to Disclose,
Shock Event Date
04 April 2022
Hon. Andrew L. Carter, Jr.