Elon Musk sued by investors; Jack Dorsey steps down from Twitter board

Silver Lake co-CEO fails to garner enough re-election votes

Billionaire Elon Musk was sued by Twitter investors for delayed disclosure of his stake in the social media company in a complaint filed on Wednesday in California federal court.

The investors said Musk saved himself $156 million by failing to disclose that he had purchased more than 5 per cent of Twitter by March 14. He continued to buy stock after that, and ultimately disclosed in early April that he owned 9.2 per cent of the company.

“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” said the investors, led by Virginia resident William Heresniak.

The suit comes after Musk pledged an additional $6.25 billion in equity financing to fund the $44-billion offer for Twitter Inc, reducing the billionaire’s margin loan against his Tesla Inc shares to zero. The disclosure made in a regulatory filing on Wednesday signaled Musk is working to complete the deal even though he had last week linked its progress to Twitter presenting proof that spam bots accounted for less than 5 per cent of the total users.

Twitter Director Egon Durban, the co-Chief Executive Officer of private equity firm Silver Lake, failed to get enough votes for re-election to the board during the company’s annual shareholder meeting Thursday. 

Institutional Shareholders Services, an advisory firm, had recommended against Durban’s re-election because he serves on the boards of “more than five publicly-traded companies.”

Durban, however, may still remain a Twitter director despite failing to receive a majority of shareholder votes, according to Twitter’s proxy statement. The company requires board nominees to offer an “irrevocable resignation” in advance of the voting, which would kick in if a nominee failed to win the approval of shareholders and the board accepted the resignation. But the board has the power to reject the resignation, leaving the nominee as a director, according to the proxy statement. 

“Egon Durban has tendered his resignation to the board,” a Twitter spokesperson said. “The Nominating and Corporate Governance Committee of the Board will promptly consider whether to recommend that the Board accept Mr. Durban’s resignation and provide an update in due course.”

Former Chief Executive Officer Jack Dorsey did not stand for re-election Wednesday, and is no longer a board member, ending his formal relationship with the social network he co-founded in 2006. He has been a director since 2007, and was most recently Twitter CEO from mid-2015 until his resignation last year.

It wasn’t a surprise that Dorsey didn’t stand for reinstatement to the panel -- in November he said would step down as CEO as well as leave the board when his term expired. But Dorsey’s exit marks the first time in Twitter’s history that none of its co-founders is working at the company, or sitting on the board.

Twitter shareholders voted on a number of issues Wednesday, but didn’t weigh in on the biggest change confronting the San Francisco-based company: a looming buyout by billionaire Elon Musk. Twitter’s board accepted an offer from Musk in late April to take the company private for about $44 billion. The shareholder vote on whether to approve the deal will take place at a later date that hasn’t yet been announced.