Twitter investors sued both Elon Musk and Twitter itself in a California court on Wednesday, arguing that the SpaceX and Tesla billionaire drove the social media company’s price down before initiating a buyout, and then publicly disparaged Twitter in a bid to renegotiate the terms of the purchase.
The class-action suit was brought by investor William Heresniak “on behalf of himself and all others similarly situated,” which would include small investors like Herseniak all the way up to financial giants like the Vanguard Group and BlackRock, which own a combined 15% of the social media platform.
The suit alleges that Musk delayed disclosing the fact that he had bought a stake in Twitter in March, that he planned on purchasing the company, and that he intended to join the platform’s board of directors, actions that Herseniak’s lawyers argue “would have caused Twitter’s stock to increase.”
Once Musk initiated his $44 billion buyout, the suit alleges that the billionaire spread misleading information about the deal being “temporarily on hold” in order to drive down Twitter’s stock price and negotiate a better deal. Musk, a prolific Twitter user, has claimed that the prevalence of fake and spam accounts on Twitter makes the company less valuable, but the suit alleges that Musk would have known all about these accounts due to a 2021 settlement to a fraud suit alleging, “Twitter overstated its user numbers and growth rate.”
Twitter’s share price fell by 19% on May 13 after Musk tweeted, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
“Musk then continued issuing false and disparaging tweets about Twitter in an effort to drive its stock price down further,” the suit continued. “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,” it continued, citing media reports of Twitter executives fearing for their future amid rumors that Musk was planning cutbacks.
The suit then closes with an unexpected claim that Musk announced last week that he would “vote Republican,” in a bid to “further excite the media of his conduct.”
Herseniak is seeking his legal fees as well as “punitive damages at the maximum amount permitted by law,” which the suit states “exceeds the sum or value of $5,000,000.”
In addition to placing him in the crosshairs of angered investors, Musk’s takeover bid has infuriated censorship advocates, who have taken issue with his stated goal of removing Twitter’s speech restrictions. Musk, who describes himself as a “free speech absolutist,” has been condemned by liberal NGOs and threatened with an advertiser boycott funded by billionaire financier George Soros and – reportedly – Bill Gates, a proponent of wider control over the spread of information on social media.