The US Securities and Exchange Commission (SEC) has sued billionaire Elon Musk over his untimely disclosure of his purchase of 5 per cent Twitter (now X) stock in 2022 before entirely buying the social media company.
Disclosure Failure by Elon Musk
Under the SEC rules, someone buying more than a 5 per cent stake in a company must declare it within 10 calendar days of the purchase, which was 24 March 2022 in Musk’s case. However, Musk did so on 4 April 2024, 11 days after the deadline, thus violating federal law.
According to the complaint, Musk’s untimely disclosure of his stake in the company kept the stock process at an artificially low price. The billionaire bought another over $500 million worth of Twitter shares before releasing his disclosure at the cost of other unsuspecting investors, thus unpaying about $150 million.
SEC, three letter acronym, middle word is Elon’s
— Elon Musk (@elonmusk) July 2, 2020
The share price of then-publicly-listed Twitter jumped by 27 per cent after Musk disclosed his investment in the company.
He eventually bought the social media company for $44 billion and took it private. He also rebranded it from Twitter to X.
With the lawsuit, the SEC intends to penalise Musk and make him give up the profits he gained without disclosing the investment. However, the amount of the sought penalty remains unknown.
“The SEC’s Multi-Year Campaign of Harassment”
“Today’s action is an admission by the SEC that they cannot bring an actual case – because Mr. Musk has done nothing wrong, and everyone sees this sham for what it is,” Musk’s lawyer, Alex Spiro, said in a media statement.
Interestingly, the lawsuit came only six days before Donald Trump’s inauguration as the 47th President of the United States. Musk is also a close aide of Trump, who nominated the billionaire to take charge of a newly created department, the Department of Government Efficiency (D.O.G.E.), aimed at cutting government spending.
While Trump retake the White House, the SEC Chair Gary Gensler will step down. Trump-nominated Paul Atkins will take over the regulator as its next Chair and is expected to review many of his predecessor’s decisions.
The SEC also sued Musk in 2018 over his Tweet on possibly taking Tesla private. The billionaire settled by paying a civil fine of $20 million and agreeing that Tesla lawyers would review his tweets about the company before posting.
SEC, three letter acronym, middle word is Elon’s
— Elon Musk (@elonmusk) July 2, 2020
The American regulator also investigated Musk’s Twitter purchase deal in 2022 and even went to court to compel Musk to testify as a part of the investigation.
“As the SEC retreats and leaves office, the SEC’s multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tak complaint against Mr. Musk under Section 13(d) for an alleged administrative failure to file a single form—an offense that, even if proven, carries a nominal penalty,” Spiro added.
This article was written by Arnab Shome at www.financemagnates.com.
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