Twitter shareholders sue Elon Musk over takeover bid

Twitter shareholders have taken legal action against Tesla chief executive Elon Musk, accusing him of acting illegally in his takeover bid.

The US lawsuit alleges that Musk attempted to drag down the social media giant's share price as part of an effort to bail out of the deal or secure a much lower price for the business.

Twitter investors say Musk waived due diligence when he made his $44.0bn offer for the firm, meaning he had forfeited the right to investigate the group's non-public finances - something he has since sought to do after putting the deal on hold until Twitter provides further information regarding just how many of its accounts were spambots.

Musk has since stated he believes he should pay less than initially offered if more than 5% of Twitter accounts reveal themselves to be fake.

Shareholders also accused Musk of badmouthing Twitter, violating both the non-disparagement and non-disclosure clauses of his contract with the social media giant.

"In doing so, Musk hoped to drive down Twitter's stock price and then use that as a pretext to attempt to re-negotiate the buyout," said the lawsuit.

The suit also alleges Musk failed to disclose his 9% stake in the company within the timeframe required by the Securities and Exchange Commission, saving himself more than $156.0m by failing to do so as it alleged an earlier disclosure may have pushed up share prices.

As of 1100 BST, Twitter shares were down 1.04% in pre-market trading at $39.11 each.

Reporting by Iain Gilbert at Sharecast.com