Elon Musk is facing a lawsuit from the SEC over his failure to promptly disclose a large stake in Twitter, which allegedly enabled him to save $150 million at the expense of shareholders. The regulator is seeking to impose penalties, underscoring Musk’s contentious history with the agency.
SEC Files Lawsuit Against Musk for Alleged Twitter Stake Disclosures
SEC Files Lawsuit Against Musk for Alleged Twitter Stake Disclosures
The Securities and Exchange Commission alleges Elon Musk's late disclosure of Twitter shares cost investors significantly.
The U.S. Securities and Exchange Commission (SEC) has initiated legal proceedings against billionaire entrepreneur Elon Musk, claiming he neglected to reveal that he had significantly increased his stake in Twitter before its acquisition. This oversight allowed Musk to purchase shares at what the SEC describes as "artificially low prices," resulting in an alleged financial windfall estimated at $150 million for himself.
According to regulations established by the SEC, any investor who acquires more than 5% of a company's stock is required to report this acquisition within ten days. Musk, however, failed to disclose his holdings within this timeframe, waiting 21 days post-acquisition to reveal the change. In an immediate response via social media, Musk dismissed the SEC as a "totally broken organisation," criticizing their focus on his case when more severe offenses remain unpunished.
The SEC complaint asserts that Musk's failure to comply with disclosure rules has inflicted significant economic harm on investors. His legal representative, Alex Spiro, characterized the lawsuit as a "sham" and described it as part of a targeted "campaign of harassment" against Musk.
Following Musk's announcement of his stock acquisition on April 4, 2022, Twitter's shares soared more than 27%. Musk went on to finalize the purchase of Twitter for $44 billion in October 2022, subsequently rebranding the platform as 'X.' Filed in a federal court in Washington D.C. on Tuesday, the SEC's lawsuit seeks to compel Musk to surrender "unjust profits" and pay civil penalties.
This recent complaint adds to a long history of disputes between Musk and the SEC. Musk previously clashed with the agency in 2018, when he faced accusations of misleading investors about taking Tesla private. Following a settlement in that case, he agreed to constraints on his public communications relating to Tesla.
Furthermore, SEC Chair Gary Gensler announced his impending resignation, coinciding with Donald Trump's potential return to the presidency, who stated his intent to fire Gensler. This backdrop adds a political dimension to Musk’s ongoing legal entanglements with the SEC, given Musk's previous support for Trump, as both navigate a complex landscape of investor relations and regulatory compliance.
