The lawsuit alleges that Musk took too long to publish his 9% stake in Twitter

Elon Musk’s unusual entanglement with Twitter – which he now wants to buy – has caught the attention of not only Silicon Valley and the social media world, but also some securities lawyers.

Even before Mr. Musk announced Thursday morning that he had offered to buy Twitter for about 43 billion, last month the acquisition of shares in a large block of his social media company caught the eye of a law firm that is suing the billionaire.

On Tuesday, the law firm Block & Leviton filed a federal lawsuit against Mr. Musk on behalf of multiple Twitter shareholders, who they say lost money when Tesla’s chief executive created more than 9 percent equity shares on Twitter. The lawsuit seeks class action status and claims that investors on Twitter who sold shares late last month could lose potential profits because Mr Musk did not disclose his large ownership stake.

The civil complaint alleges that Mr. Musk revealed that he had acquired 9 percent of the shares on Twitter – making him the largest shareholder in the company – although he had begun building his partnership long ago. When Mr. Musk finally revealed his shares on Twitter, the company’s share price rose from $ 39.31 to $ 49.97. The lawsuit claims that Mr. Musk should have disclosed in a regulatory filing by March 24 that he had acquired a 5 percent equity stake in Twitter.

The Securities and Exchange Commission wants investors to disclose that they have 5 percent or more equity in a company within 10 days of the acquisition of shares – a rule intended primarily to force investment managers, like hedge funds, to disclose their actions. Market

The lawsuit alleges that Mr. Musk saved money by buying Twitter shares at a cheaper price without filing the required files within that time frame. And he sold shares to disadvantaged investors before the opportunity arose to benefit from the price increase.

Since Mr. Musk took his big financial position on Twitter, Wall Street and securities lawyers have speculated that the SEC could investigate whether the billionaire violated any securities laws by not disclosing his shares immediately.

In order for Mr. Musk to violate the SEC rules, the agency must determine whether Mr. Musk intended to violate the 5 percent filing rules or whether it was a negligent mistake or oversight.

The SEC declined to comment. An attorney for Mr. Musk was not immediately available for comment.

Mr Musk’s takeover bid for Twitter comes just weeks after he began trying to end a four-year-old settlement with the SEC that required his posts on Twitter to be reviewed by Tesla-electric car company officials for possible market changes. She’s moving. The compromise with the SEC came as a result of a post on Twitter that Mr. Musk made about raising funds to privatize Tesla when in reality he had no funding.

Mr Musk has since been frustrated with the resolution and the need to review his posts on Twitter.

Ifrat Livni Contributing Reporting.

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