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Twitter investors sue Elon Musk for market manipulation

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Tesla CEO Elon Musk is being sued by Twitter shareholders for his actions over the course of his acquisition process of the social media platform.

Video Transcript

JARED BLIKRE: Welcome back. Shareholders of Twitter are suing Elon Musk, as well as Twitter itself, for allegedly causing market manipulation over the course of acquisition process between Musk and Twitter. And for more on this, we're going to welcome in Yahoo Finance's Dan Howley. Dan, first of all, I have to give you credit for correctly identifying the George Washington Bridge. Julie, I think we lost Dan Howley here.

JULIE HYMAN: Oh, no, did we lose Dan Howley, you guys? OK, we lost Dan Howley?

JARED BLIKRE: It happens.

JULIE HYMAN: Well, are we going to come back to Dan Howley, or should we talk about Twitter for a minute? OK, so let's talk about it. So, first of all, the--

JARED BLIKRE: Breaking news, too.

JULIE HYMAN: The Securities and Exchange Commission is looking into Elon Musk's disclosure of his stake in Twitter. This is not shocking, right? I mean, he disclosed--

JARED BLIKRE: They had to.

JULIE HYMAN: They had to. Now, the question is, are they going to do anything about it? And I think there's pretty broad skepticism about their ability-- Dan, there's some pretty broad skepticism about the ability of the SEC to actually clamp down. But there's also a lawsuit in effect here for some shareholders. Do we have Dan back? There he is.

DAN HOWLEY: Yep, I'm here. Sorry about that, guys. Yes.

JULIE HYMAN: No worries.

DAN HOWLEY: There is this lawsuit that a group of shareholders are seeking to have a class action status. And essentially what they're saying is that Elon Musk has violated these California corporate laws. Part of that has to do with the timing in which he had disclosed his stake in Twitter, basically that he didn't disclose it in a timely manner, and in doing so, was able to get a discount on later stock purchases, rather than the inflated price that he may have seen if he had disclosed his initial stake earlier. That being because people would see Elon Musk buying into Twitter and then immediately think, well, we should also buy in because something is going on here. So that's part of the issue there.

But that's not the only thing that Elon Musk is dealing with. The SEC is also looking in to his disclosures in his early stake. That's according to Reuters, which had reported that a little less than an hour ago. And then obviously, we have issues with the ongoing fluctuations in share price itself. Now that's also part of this California proposed suit. They say that because of his, let's just say shenanigans, the stock price of Twitter has suffered as a result. Not so much in Tesla, but that's not part of this suit.

Him basically saying that it's on hold, that he's still dedicated to it, questioning how many bots there are, kind of talking negatively to the CEO. That, they say, is part of the larger issue that Elon Musk has with Twitter. And that seems to be their take here in this proposed suit.

There's also these comments that he continues to put out on Twitter that don't necessarily relate to this suit, but don't really look good for Twitter in general. He has put out a poll recently asking whether or not people trusted politicians more than billionaires. Obviously, Elon Musk has a ton of followers, who are, I mean, basically fanatics and voted in favor of billionaires.

You know, I don't know of two other classes that people may want to compare in that way. Most people don't trust either of them. But I do think that this is part of a larger issue with Elon Musk and Twitter here and whether or not he'll eventually acquire it. But, you know, he seems to be on track to do so. And Twitter is going to hold him to it.

JULIE HYMAN: It does seem that way. I wonder how the SEC would score on that particular poll, especially if you asked followers of Musk. Whew. All right, thanks so much, Dan Howley. Have a great weekend.

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