SEC sues Elon Musk for failure to disclose growing Twitter stake on time

By Nicola M White

  The Securities and Exchange Commission sued Elon Musk, alleging that the billionaire waited to disclose his acquisition of Twitter Inc. shares in order to build his position at lower prices. 

The agency claims in a complaint filed Tuesday in federal court in Washington, DC, that the billionaire deliberately ignored a deadline to publicly disclose that he acquired more than a 5 per cent stake in the company early in 2022, several months before he completed his acquisition of the social media platform.

 

Alex Spiro, a lawyer for Musk, said the action is “an admission” that the SEC cannot bring an “actual case,” because Musk “has done nothing wrong and everyone sees this sham for what it is.”

 

“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 said in a statement. 

Trump Supporter

Musk, the world’s richest person, has become one of Donald Trump’s biggest supporters and closest advisors in recent months. The president-elect has tasked Musk, along with Vivek Ramaswamy, with a broad government cost-cutting initiative; the mega-billionaire has also joined the president-elect in conversations with foreign officials.

 

The regulator has been probing Musk’s investment in Twitter since 2022, sending a missive to him to explain why he hadn’t disclosed his stake in Twitter within the correct timeline.

 

By keeping his purchase quiet, Musk was able to buy shares at “artificially low prices,” allowing him to underpay for at least $150 million worth of stock, the SEC said in the complaint.

 

By March 2022, Musk had acquired beneficial ownership of more than 9 per cent of the company’s outstanding common stock. This triggered reporting requirements due within 10 days of the purchase. Musk filed the report 11 days later, making the company’s stock price surge by 27 per cent from the day before, according to the lawsuit.

Civil Penalty

The SEC asked the court to direct Musk to pay a civil penalty and return profits, which the agency claims he reaped unjustly from his stock purchases. The agency declined to comment beyond the suit.

 

Musk also faces investor litigation accusing him of hiding his acquisition of Twitter shares.

 

The case is Securities and Exchange Commission v. Musk, 25-cv-00105, US District Court, District of Columbia (Washington).