Elon Musk is in hot waters as he faces a class-action lawsuit and an SEC investigation.
The billionaire has been accused by Twitter shareholders of violating California corporate laws on several fronts, and in doing so engaged in market manipulation.
Since Musk’s acquisition bid, Twitter’s share price has dropped more than 12%, and Tesla’s is down about 28%.
The shareholders’ complaint says Musk’s gripes about “bots” were part of a scheme to negotiate a better price or kill the deal.
The United States Securities and Exchange Commission also made public on May 27 that it has begun to investigate Elon Musk’s purchase of Twitter stock last April.
The government agency will look at whether the South African billionaire was honest about his intentions for the social media company.
The Tesla and SpaceX CEO revealed a significant stake in Twitter on April 4, and 10 days later proposed a buyout for $44 billion, or $54.20 per share.
Musk had sold and pledged a chunk of his Tesla holdings as collateral for loans in order to finance the deal.
Tesla shares were off more than 40% at the end of trading Wednesday since Musk first revealed his stake.
The class-action lawsuit claims that Musk financially benefited by delaying required disclosures about his stake in Twitter and by temporarily concealing his plan in early April to become a board member at the social network.
Musk also bought shares in Twitter, the complaint says, while he knew insider information about the company based on private conversations with board members and executives, including former CEO Jack Dorsey and Silver Lake co-CEO Egon Durban, a Twitter board member whose firm had previously invested in SolarCity before Tesla acquired it.
Earlier this month, Musk said he was putting the Twitter acquisition “on hold” to learn more about inauthentic activity on the platform, including information about fake or automated accounts.
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.