US watchdog sues Elon Musk over late disclosure of Twitter stake technology
The US Securities and Exchange Commission says Musk’s failure to disclose his stake caused him to pay less than $150 million for the shares.
Elon Musk is being sued by the securities regulator in the United States for allegedly not timely disclosing his stake in Twitter before purchasing the social media platform.
The US Securities and Exchange Commission (SEC) on Tuesday said Musk failed to disclose within the required 10-day period that he had acquired more than 5 percent of Twitter stock in March 2022.
The failure of Tesla and SpaceX CEOs to notify regulators allowed them to buy shares at “artificially low prices,” the SEC said in a filing in the U.S. District Court in the District of Columbia.
Musk’s actions ultimately allowed him to “underpay at least $150 million for shares he purchased after the beneficial ownership reports came out,” the SEC said.
The SEC said Musk ultimately informed regulators that he had acquired more than 9 percent of Twitter’s stock on April 4, 2022, 11 days after the disclosure.
According to the regulator, Twitter’s share price that day was 27 percent higher than the previous day’s close.
“Because Musk failed to timely disclose his beneficial ownership, he was able to make these purchases from the unsuspecting public at artificially low prices, which was still more than five percent of Musk’s Twitter common stock. The undisclosed material information of the beneficial ownership and investment objectives,” the securities regulator said.
“In total, Musk underpaid Twitter investors by more than $150 million for purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic losses.
Under US securities rules, investors buying more than 5 percent of a company’s shares are required to disclose their holdings so that shareholders can make informed decisions about investments.
The SEC has sued Musk twice before, including over a 2018 Twitter post in which he claimed he had secured funding to take electric car company Tesla private.
Musk settled that lawsuit by paying a $20 million civil penalty, agreeing to subject some of his social media activity to legal review and resigning from his role as Tesla chairman.
Musk completed the purchase of Twitter for $44 billion in October 2022 after signing the acquisition deal, which he later attempted to withdraw.
The SEC’s latest enforcement action, which was announced with less fanfare, comes just days before Chairman Gary Gensler is to step down on January 20, which is the day of US President-elect Donald Trump’s inauguration.
It is unclear whether the lawsuit against Musk, one of Trump’s most influential allies, will continue under Trump, who has nominated former SEC Commissioner Paul Atkins as Gensler’s successor.
