Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 1 of 10
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`Plaintiff,
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`Case No.
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`
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`CLASS ACTION COMPLAINT
`FOR VIOLATION OF THE
`FEDERAL SECURITIES LAWS
`
`
`Jury Trial Demanded
`
`
`MARC BAIN RASELLA, Individually and
`On Behalf of All Others Similarly Situated,
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`
`
` v.
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`ELON R. MUSK,
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`
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`
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`
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`Defendant.
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`
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`Plaintiff Marc Bain Rasella (“Plaintiff”), by and through his attorneys, alleges upon
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`personal knowledge as to his own acts, and upon information and belief as to all other matters,
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`based upon the investigation conducted by and through his attorneys, which included, among other
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`things, a review of documents filed by Defendant Elon R. Musk (“Musk”) with the United States
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`Securities and Exchange Commission (the “SEC”), news reports, and other publicly available
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`documents, as follows:
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`This is a federal securities class action on behalf of all investors who sold or
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`otherwise disposed of Twitter, Inc. (“Twitter” or the “Company”) securities between March 24,
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`2022, and April 1, 2022, inclusive (the “Class Period”). This action is brought on behalf of the
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`Class for violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”),
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`15 U.S.C. § 78j(b) and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5.
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`2.
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`Elon Musk is the founder of Tesla and SpaceX, and according to Forbes, is the
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`richest person in the world.
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`
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`
`Plaintiff,
`
`Case No.
`
`
`
`CLASS ACTION COMPLAINT
`FOR VIOLATION OF THE
`FEDERAL SECURITIES LAWS
`
`
`Jury Trial Demanded
`
`
`MARC BAIN RASELLA, Individually and
`On Behalf of All Others Similarly Situated,
`
`
`
` v.
`
`ELON R. MUSK,
`
`
`
`
`
`
`
`Defendant.
`
`
`
`Plaintiff Marc Bain Rasella (“Plaintiff”), by and through his attorneys, alleges upon
`
`personal knowledge as to his own acts, and upon information and belief as to all other matters,
`
`based upon the investigation conducted by and through his attorneys, which included, among other
`
`things, a review of documents filed by Defendant Elon R. Musk (“Musk”) with the United States
`
`Securities and Exchange Commission (the “SEC”), news reports, and other publicly available
`
`documents, as follows:
`
`NATURE AND SUMMARY OF THE ACTION
`
`1.
`
`This is a federal securities class action on behalf of all investors who sold or
`
`otherwise disposed of Twitter, Inc. (“Twitter” or the “Company”) securities between March 24,
`
`2022, and April 1, 2022, inclusive (the “Class Period”). This action is brought on behalf of the
`
`Class for violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”),
`
`15 U.S.C. § 78j(b) and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5.
`
`2.
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`Elon Musk is the founder of Tesla and SpaceX, and according to Forbes, is the
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`richest person in the world.
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`
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 2 of 10
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`3.
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`Beginning in January 2022, Musk started to acquire shares of Twitter. By March
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`14, 2022, Musk had acquired more than a 5% ownership stake in Twitter.
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`4.
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`Pursuant to Section 13(d) of the Exchange Act and SEC Rule 13d-1 promulgated
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`thereunder, 17 C.F.R. § 240.13d-1(a), Musk was required to file a Schedule 13 with the SEC within
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`10 days of passing the 5% ownership threshold in Twitter, or March 24, 2022.
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`5.
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`Musk did not file a Schedule 13 with the SEC within the required time and instead
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`continued to amass Twitter shares, eventually acquiring a 9.1% stake in the Company before
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`finally filing a Schedule 13 on April 4, 2022.
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`6.
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`When Musk finally filed the required Schedule 13, thereby revealing his ownership
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`stake in Twitter, the Company’s shares rose from a closing price of $39.31 per share on April 1,
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`2022, to close at $49.97 per share on April 4, 2022 – an increase of approximately 27%.
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`7.
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`Investors who sold shares of Twitter stock between March 24, 2022, when Musk
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`was required to have disclosed his Twitter ownership, and before the actual April 4, 2022
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`disclosure, missed the resulting share price increase as the market reacted to Musk’s purchases and
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`were damaged thereby.
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`8.
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`By failing to disclose his ownership stake via Schedule 13, Musk was able to
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`acquire shares of Twitter less expensively during the Class Period.
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`9.
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`Throughout the Class Period, Defendant made materially false and misleading
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`statements and omissions by failing to disclose to investors that he had acquired a 5% ownership
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`stake in Twitter as required by Section 13(d) of the Exchange Act and SEC Rule 13d-1
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`promulgated thereunder, 17 C.F.R. § 240.13d-1.
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 3 of 10
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`JURISDICTION AND VENUE
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`10.
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`The federal law claims asserted herein arise under § 10(b) of the Exchange Act, 15
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`U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5, as
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`well as under the common law.
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`11.
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`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
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`§1331 and § 27 of the Exchange Act, 15 U.S.C. § 78aa.
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`12.
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`This Court has jurisdiction over Defendant Musk because Musk is an individual
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`who has sufficient minimum contacts with this District so as to render the exercise of jurisdiction
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`by the District Court permissible under traditional notions of fair play and substantial justice.
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`Furthermore, many of the acts and omissions complained of herein occurred in this District.
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`13.
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`Venue is proper in this District pursuant to § 27 of the Exchange Act, 15 U.S.C.
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`§ 78aa and 28 U.S.C. § 1931(b), as Twitter’s securities trade on the New York Stock Exchange
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`(the “NYSE”), which is located in this District. Moreover, Musk was required to file a Schedule
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`13 with the SEC to disclose his investment in Twitter, which trades on the NYSE.
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`14.
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`In connection with the acts, omissions, conduct and other wrongs in this Complaint,
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`Defendant, directly or indirectly, used the means and instrumentalities of interstate commerce,
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`including but not limited to the United States mail, interstate telephone communications and the
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`facilities of the national securities exchange.
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`PARTIES
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`15.
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`Plaintiff Marc Bain Rasella (“Plaintiff”) sold shares of Twitter at artificially
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`deflated prices during the class period, and has been damaged by the revelation of the Musk’s
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`material misrepresentations and material omissions.
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`16.
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`Defendant Elon R. Musk (“Musk”) is the founder of Tesla and SpaceX, and
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`according to Forbes, is the richest person in the world.
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 4 of 10
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`17.
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`Defendant Musk, because of his position as a 5% owner in Twitter, had an
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`obligation to file a Schedule 13 with the SEC. Defendant had the obligation, ability, and
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`opportunity to prevent the issuance of the false statements and omissions alleged herein. Because
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`of his position as a 5% owner in Twitter, and access to material non-public information available
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`to himself but not to the public, Defendant Musk knew that the adverse facts specified herein had
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`not been disclosed to and were being concealed from the public and that the omissions being made
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`were false and misleading. Defendant Musk is liable for the false statements pleaded herein.
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`RELEVANT NON-PARTY
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`18.
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`Twitter, Inc. (“Twitter” or the “Company”) is a social media platform that trades
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`on the NYSE under the ticker “TWTR.”
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`SUBSTANTIVE ALLEGATIONS
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`19.
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`Beginning in January 2022, Musk started to acquire shares of Twitter. By March
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`14, 2022, Musk had acquired more than a 5% ownership stake in Twitter.
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`20.
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`Pursuant to Section 13(d) of the Exchange Act and SEC Rule 13d-1 promulgated
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`thereunder, 17 C.F.R. § 240.13d-1(a), Musk was required to file a Schedule 13 with the SEC within
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`ten days of passing the 5% ownership threshold in Twitter, i.e., on March 24, 2022.
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`21. Musk did not file a Schedule 13 with the SEC within the required time and instead
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`continued to amass Twitter shares, eventually acquiring a 9.1% stake in the Company before
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`finally filing a Schedule 13 on April 4, 2022.
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`22. When Musk finally filed the required Schedule 13, thereby revealing his ownership
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`stake in Twitter, the Company’s shares rose from a closing price of $39.31 per share on April 1,
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`2022, to close at $49.97 per share on April 4, 2022 – an increase of approximately 27%.
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`23.
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`Investors who sold shares of Twitter stock between March 24, 2022, when Musk
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`should have disclosed his Twitter ownership, and before the actual April 4, 2022 disclosure missed
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 5 of 10
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`the resulting share price increase as the market reacted to Musk’s purchases and were damaged
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`thereby.
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`24. Musk was motivated to delay his Schedule 13 filing. By failing to disclose his
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`ownership stake via Schedule 13, Musk was able to acquire shares of Twitter less expensively
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`during the Class Period.
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`25.
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`As a result of the foregoing, throughout the Class Period, Defendant Musk made
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`materially false and misleading statements by failing to disclose to investors that he had acquired
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`a 5% ownership stake in Twitter as required by Section 13(d) of the Exchange Act and SEC Rule
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`13d-1 promulgated thereunder, 17 C.F.R. § 240.13d-1.
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`CLASS ACTION ALLEGATIONS
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`26.
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`Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules
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`of Civil Procedure on behalf of a class of all persons and entities who sold Twitter securities
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`between March 24, 2022, and April 4, 2022, inclusive. Excluded from the Class is Defendant
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`Musk, as well as his family and affiliates.
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`27.
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`The members of the Class are so numerous that joinder of all members is
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`impracticable. The disposition of their claims in a class action will provide substantial benefits to
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`the parties and the Court. Throughout the Class Period, Twitter’s shares actively traded on the
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`NYSE. Although the exact number of Class members is unknown to Plaintiff at this time and can
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`only be ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds
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`or thousands of members in the proposed Class. Millions of Twitter shares were publicly traded
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`during the Class Period on the NYSE. Record owners and other members of the Class may be
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`identified from records maintained by Twitter or its transfer agent and may be notified of the
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`pendency of this action by mail, using the form of notice similar to that customarily used in
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`securities class actions.
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 6 of 10
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`28.
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`There is a well-defined community of interest in the questions of law and fact
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`involved in this case. Questions of law and fact common to the members of the Class which
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`predominate over questions which may affect individual Class members include:
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`a. Whether Defendant violated the Exchange Act;
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`b. Whether Defendant omitted and/or misrepresented material facts;
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`c. Whether Defendant’s statements omitted material facts necessary to make the
`statements made, in light of the circumstances under which they were made, not
`misleading;
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`d. Whether Defendant knew or recklessly disregarded that his statements were false
`and misleading;
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`e. Whether the price of Twitter’s securities was artificially deflated; and
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`f. The extent of damage sustained by Class members and the appropriate measure of
`damages.
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`29.
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`Plaintiff’s claims are typical of those of the Class because Plaintiff and the Class
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`sustained damages from Defendant’s wrongful conduct alleged herein.
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`30.
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`Plaintiff will adequately protect the interests of the Class and has retained counsel
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`who are experienced in class action securities litigation. Plaintiff has no interests that conflict with
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`those of the Class.
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`31.
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`A class action is superior to other available methods for the fair and efficient
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`adjudication of this controversy.
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`FRAUD ON THE MARKET
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`32.
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`Plaintiff will rely upon the presumption of reliance established by the fraud-on-the-
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`market doctrine that, among other things:
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`a. Defendant made public misrepresentations or failed to disclose material facts
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`during the Class Period;
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`b. The omissions and misrepresentations were material;
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 7 of 10
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`c. Twitter’s securities traded in efficient markets;
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`d. The misrepresentations alleged herein would tend to induce a reasonable investor
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`to misjudge the value of the Twitter’s securities; and
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`e. Plaintiff and other members of the class sold Twitter’s securities between the time
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`Defendant misrepresented or failed to disclose material facts and the time that the
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`true facts were disclosed, without knowledge of the misrepresented or omitted facts.
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`33.
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`At all relevant times, the markets for Twitter’s securities were efficient for the
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`following reasons, among others: (i) Twitter filed periodic public reports with the SEC; and (ii)
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`Twitter regularly communicated with public investors via established market communication
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`mechanisms, including through regular disseminations of press releases on the major news wire
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`services and through other wide-ranging public disclosures such as communications with the
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`financial press, securities analysts, and other similar reporting services. Plaintiff and the Class
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`relied on the price of the Twitter securities, which reflected all information in the market, including
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`the misstatements and/or omissions by Defendant.
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`NO SAFE HARBOR
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`34.
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`The statutory safe harbor provided for forward-looking statements under certain
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`conditions does not apply to any of the allegedly false statements pleaded in this Complaint. The
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`specific statements pleaded herein were not identified as forward-looking statements when made.
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`35.
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`To the extent there were any forward-looking statements, there were no meaningful
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`cautionary statements identifying important factors that could cause actual results to differ
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`materially from those in the purportedly forward-looking statements.
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`LOSS CAUSATION
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`36.
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`Prior to the market opening on April 4, 2022, Defendant Musk filed the required
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`Schedule 13 with the SEC, which disclosed his ownership stake in Twitter. On this news, the price
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 8 of 10
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`of Twitter shares increased from a closing price of $39.31 per share on April 1, 2022, to close at
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`$49.97 per share on April 4, 2022 – an increase of approximately 27%.
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`37.
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`As a result, individuals who sold shares of Twitter between March 24, 2022 – when
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`Musk should have filed the Schedule 13 and April 4, 2022, when Musk actually filed the Schedule
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`13 – did so at artificially deflated prices and were damaged thereby.
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`SCIENTER ALLEGATIONS
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`As alleged herein, Defendant acted with scienter since Defendant Musk knew or
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`38.
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`recklessly disregarded that he had an obligation to file a Schedule 13G/D to disclose his ownership
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`stake in Twitter. Furthermore, Defendant Musk saved approximately $143 million on his Twitter
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`purchases by delaying the filing of the required Schedule 13G/D and purchasing additional shares
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`at deflated prices.
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`Count One
`Violations of § 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder
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`Plaintiff repeats and re-alleges each and every allegation contained above as if fully
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`39.
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`set forth herein.
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`40.
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`During the Class Period, Defendant Musk disseminated or approved the false
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`statements specified above, which he knew or deliberately disregarded were misleading in that
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`they contained misrepresentations and failed to disclose material facts necessary to make the
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`statements made, in light of the circumstances under which they were made, not misleading.
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`41.
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`Defendant Musk violated § 10(b) of the Exchange Act and Rule 10b-5 in that he (i)
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`employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact
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`and/or omitted to state material facts necessary to make the statements not misleading; and (iii)
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`engaged in acts, practices, and a course of business which operated as a fraud and deceit upon
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`those who sold Twitter’s securities during the class period.
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 9 of 10
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`42.
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`Plaintiff and the Class have suffered damages in that, in reliance on the integrity of
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`the market, they sold Twitter’s Securities at artificially deflated prices. Plaintiff and the Class
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`would not have sold Twitter’s securities at the price sold, or at all, if they had been aware that the
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`market prices had been artificially and falsely deflated by Defendant’s misleading statements.
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff prays for relief and judgment, as follows:
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`(a)
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`determining that this action is a proper class action pursuant to Rule 23(a) and
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`23(b)(3) of the Federal Rules of Civil Procedure on behalf of the Class as defined herein, and a
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`certification of Plaintiff as class representative pursuant to Rule 23 of the Federal Rules of Civil
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`Procedure and appointment of Plaintiff’s counsel as Lead Counsel;
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`(b)
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`awarding compensatory and punitive damages in favor of Plaintiff and the other
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`class members against Defendant, jointly and severally, for all damages sustained as a result of
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`Defendant’s wrongdoing, in an amount to be proven at trial, including pre-judgment and post-
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`judgment interest thereon.
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`(c)
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`awarding Plaintiff and other members of the Class their costs and expenses in this
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`litigation, including reasonable attorneys’ fees and experts’ fees and other costs and disbursements;
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`and
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`(d)
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`awarding Plaintiff and the other Class members such other relief as this Court may
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`deem just and proper.
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`DEMAND FOR JURY TRIAL
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`Plaintiff hereby demands a trial by jury in this action of all issues so triable.
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`Case 1:22-cv-03026 Document 1 Filed 04/12/22 Page 10 of 10
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`April 12, 2022
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`Respectfully submitted,
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`/s/ Jeffrey C. Block
`Jeffrey C. Block
`Jacob A. Walker, pro hac vice to be filed
`Nathaniel Silver
`BLOCK & LEVITON LLP
`260 Franklin Street, Suite 1860
`Boston, MA 02110
`(617) 398-5600 phone
`(617) 507-6020 fax
`jeff@blockleviton.com
`jake@blockleviton.com
`nate@blockleviton.com
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`Attorneys for Plaintiff and Proposed Lead
`Counsel
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` 10
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