Elon Musk sued by former Twitter shareholders for delay in disclosing his stake in company

Elon Musk has been sued by former Twitter shareholders who claim they missed out on recent rises in its stock price because he waited too long to disclose his stake in the company.

In a proposed class action filed in Manhattan federal court, the shareholders said Mr Musk made “materially false and misleading statements and omissions” by failing to reveal he had invested in Twitter by March 24, as required under federal law.

Mr Musk, who is also the chief executive of SpaceX and Tesla, purchased a 9.2 per cent stake in Twitter on March 14.

The purchase made him the largest shareholder in the company.

After Mr Musk disclosed his stake on April 4, Twitter shares rose by 27 per cent to $US49.97 ($67.13), which investors viewed as a vote of confidence from the world’s richest person.

US securities law requires investors to disclose within 10 days when they have acquired 5 per cent of a company, which in Mr Musk’s case would have been March 24.

The former shareholders, led by Marc Rasella, said the delayed disclosure let Mr Musk buy more Twitter shares at lower prices, while defrauding them into selling at “artificially deflated” prices.

Mr Rasella said he sold 35 Twitter shares for $US1,373 ($1,844) or an average price of $US39.23 ($52.69) between March 25 and 29.

The lawsuit seeks unspecified compensatory and punitive damages.

A lawyer for Mr Musk had no immediate comment. Tesla is not a defendant.

Twitter announced on April 5 that Mr Musk would join its board of directors, but this week the company’s chief executive said he had decided not to.

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