- SEC accuses Elon Musk of delaying disclosure of Twitter shares, claiming unfair advantage.
- Investors lost millions as Musk allegedly bought shares at depressed prices.
- Musk denies wrongdoing; SEC seeks fines and stricter disclosure enforcement.
The United States Securities and Exchange Commission (SEC) has accused noted business magnate Elon Musk of violating securities laws. The regulator says that Musk did not report his purchase of more than 5 percent of Twitter’s shares in the prescribed time, which is against the federal securities laws. The lawsuit alleges that Musk acted to give himself an unfair competitive advantage by concealing the information until after the market had closed.
Twitter was not Musk’s first target as he started purchasing the company’s shares in January 2022 up to attaining 5% ownership by March. According to the federal rules, investors are supposed to submit a disclosure to the SEC when they exceed this limit within ten days. Nevertheless, Musk postponed his filing until April 4, 2022, which made him 11 days behind the deadline.
SEC Highlights Investor Losses
The SEC’s position is that this delay enabled Musk to buy shares at artificially depressed prices. As per the suit, Musk’s control over Twitter would have made the share price soar if he had disclosed his interest at the time. The investors who sold their shares between March 25 and April 1, 2022, had no idea of Musk’s involvement and therefore incurred many losses.
The SEC alleges that Musk’s actions led to under pricing of Twitter’s shares by at least $150 million in the course of delayed disclosures. This enabled Musk to purchase more shares without worrying about the higher prices which would be a result of market awareness. The lawsuit reveals the damage done to investors who sold their shares at a discount not knowing that Musk was slowly acquiring the company.
Twitter Acquisition Controversy
As of October 2022, Musk closed a $44 billion deal to acquire Twitter. The platform has since then been renamed to ‘X’. According to SEC, Musk’s delay in reporting his shareholding position affected the overall market perception towards the acquisition.
The SEC’s lawsuit against him is baseless, according to his attorney Alex Spiro. He accused the SEC of harassing Musk and noted that the agency has no basis for its actions. The SEC wants Musk to pay a fine, and the court to make him pay back any profit he made from the delay. If the court sides with the SEC in the case, the ruling may open the door for more stringent regulation of disclosure requirements. This case also brings Musk’s financial activities into focus and could hurt him in future business.
