Musk slapped with new Twitter lawsuit over stock price

Elon Musk Twitter overview:

• Who: Elon Musk has been hit with another class action lawsuit by Twitter investors.
• Why: The investors claim the tech entrepreneur’s public statements questioning his purchase of Twitter are designed to lower the value of the brand for his benefit.
• Where: The Elon Musk Twitter class action was filed in a California federal court.

Elon Musk has been hit with another class action lawsuit by Twitter investors who claim the tech entrepreneur’s public statements questioning his purchase of Twitter are designed to lower the value of the brand for his benefit.

Plaintiff Giuseppe Pampena filed the class action lawsuit against Elon Musk Oct. 10 in a California federal court, alleging violations of federal securities laws.

According to the lawsuit, Musk’s statements and Twitter posts questioning his $44 billion purchase of Twitter were specifically designed to “create doubt about the deal and drive Twitter’s stock down substantially.” 

The statements were designed to create leverage that Musk hoped to use to either back out of the deal or renegotiate a lower buyout price, Pampena claims.

The lawsuit comes after another Twitter stockholder, Luigi Crispo, filed a class action complaint against Musk July 29 asking the court to force the entrepreneur to complete the $54.20-per-share deal he signed April 25.

After signing the deal, Musk later backed out, seeking to terminate it on July 8 by alleging on Twitter and in statements that Twitter failed to disclose pertinent details about its operations to him.

Among Musk’s allegations is that Twitter gamed its numbers by not properly counting how many users on the platforms are “bots.” 

Elon Musk knew about Twitter ‘bots,’ lawsuit states

Pampena claims Musk already knew about the so-called “bots” on Twitter, but instead went public to state that the deal was on hold while he looked into the issue. 

He adds that Musk waived detailed due diligence as a condition precedent to his obligations under the contract. 

Still, Musk continued to post “false and disparaging tweets” about Twitter as part of his effort to drive down its stock price.

“Musk’s false and misleading tweets had the desired effect, as they caused [Twitter’s] stock to decline in the days following the tweets, in stark contrast to the Nasdaq index, which increased,” Pampena alleges.

Musk’s conduct meant that investors sold at lowered prices, the lawsuit states. It also substantially harmed Twitter’s business, which further damaged the stock, it says.

After backing out of the agreement initially, Musk changed course last week and agreed to close on his original deal, two weeks before the legal battle with Twitter was set to head to trial. 

Pampena is looking to represent all Twitter shareholders who sold stock between May 13 and Oct. 4 and have “suffered losses due to false statements issued by defendant Elon R. Musk.” 

He’s seeking certification of the class action, damages, fees, costs and a jury trial. 

Are you a Twitter investor? Let us know your thoughts in the comments! 

Pampena is represented by Joseph W. Cotchett, Mark C. Molumphy, Tyson C. Redenbarger and Julia Q. Peng of Cotchett Pitre & McCarthy LLP, and Francis A. Bottini Jr., Albert Y. Chang and Yury A. Kolesnikov of Bottini & Bottini Inc.

The Elon Musk Twitter class action is Pampena v. Musk, Case No. 3:22-cv-05937, in the U.S. District Court for the Northern District of California.

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