Twitter shareholders sued the company and potential acquirer musk because the latter two are still dealing with the chaotic acquisition process, which led to sharp fluctuations in Twitter's share price Musk disclosed Twitter's Shareholding on April 4, and ten days later proposed to buy the company for $44 billion, or $54.20 per share.
He has sold and mortgaged most of his Tesla shares as loan collateral to finance the deal.
Since Musk's bid, Twitter's share price has fallen by more than 12%, while Tesla's share price has fallen by about 28% in the wave of technology stock selling. Since musk first disclosed its shareholding in twitter, Tesla's share price has fallen by about 40%.
In a class action lawsuit filed on Wednesday, twitter shareholders claimed that musk violated California enterprise law in many ways and was therefore involved in market manipulation.
Shareholders claimed that musk delayed disclosing Twitter's shareholding and temporarily concealed his plan to become a member of the company's board of directors in early April, thereby benefiting financially.
According to the indictment, musk learned the inside information of twitter through private conversations with board members and executives, thus snapping up twitter shares, including Jack Dorsey, Musk's old friend and former CEO of twitter, as well as Egon Durban, CEO of Silver Lake and member of Twitter's board of directors. Egon Durban's company invested in SolarCity before Tesla acquired it.
The proposed class action also argues that musk violated California law by making the public doubt whether it would complete the transaction after signing the acquisition contract.
Earlier this month, musk said he would "shelve" the acquisition of Twitter to learn more about false and spam accounts on the platform.
Shareholders said that his complaints about false accounts were part of a plan to negotiate a better purchase price or terminate the transaction:
"Musk continues to make statements, send tweets, and engage in activities aimed at raising doubts about the transaction and driving Twitter's share price down sharply, so as to create chips he hopes to use to exit the acquisition or renegotiate the 25% discount acquisition, which will reduce the acquisition price by $11 billion."