Twitter Investor Group Leads Suit Against Elon Musk Over Buyout

The Twitter Investor Group, made up of four investors, will lead a securities-fraud class action alleging that Elon Musk manipulated Twitter Inc.'s stock price from May to October 2022 during his buyout of the company, a federal court said Monday.

Investors allege Musk took steps to lower Twitter’s stock price in an attempt to renegotiate the buyout price of $54.20 per share. They allege Musk’s failure to disclose when his Twitter holdings exceeded 5% and his public statements saying he’d put the buyout deal on hold artificially lowered Twitter’s stock price.

The group includes Brian Belgrave, Steve Garrett, John Garrett, and Nancy Price. They collectively sold just over 28,000 shares during the proposed class period.

Giuseppe Pampena initially filed suit against Musk for violations of the Securities Exchange Act in the US District Court for the Northern District of California on Oct. 10, a week after he announced he would follow through on the buyout deal and Twitter’s stock rallied.

The investors allege Musk’s statements about putting the deal on hold were intentionally misleading and designed to tank the stock price because he had waived due diligence and had no right to cancel the deal. Musk’s actions and tweets allegedly wiped out billions of dollars in Twitter’s valuation and caused a financial loss to those who traded Twitter stock at a lower price than $54.20 per share.

The proposed class includes people who traded Twitter stock between May 13, 2022, and Oct. 4, 2022.

The court considered a second bid for lead plaintiff from Mohammed Samara. TIG and Samara proposed different ways of calculating who had the largest financial interest. The investor group argued financial interest should be calculated based on who sold the most shares during the proposed class period. Samara argued the best measure was “recoverable loss,” calculated by multiplying the number of sold shares by the difference between the price during the class period and the sale price of $54.20.

“Under either method, the Group has the largest financial interest,” Judge Charles R. Breyer wrote.

Breyer also approved Bottini & Bottini Inc and Cotchett Pitre & McCarthy LLP as lead counsel for the case.

The case is Pampena v. Musk, N.D. Cal., No. 3:22-cv-05937, 4/24/23.