Elon Musk sued for late disclosure of stake in Twitter
Elon Musk was sued on Tuesday by the US Securities and Exchange Commission for waiting too long to disclose in 2022 he had amassed a large stake in Twitter, the social media company he later bought.
US Securities and Exchange Commission says Musk’s failure to disclose stake allowed him to underpay $150m for shares.
Elon Musk was sued on Tuesday by the US Securities and Exchange Commission, which accused the world’s richest person of waiting too long to disclose in 2022 he had amassed a large stake in Twitter, the social media company he later bought.
In a complaint filed in Washington, DC federal court, the SEC said Musk violated federal securities law by waiting 11 days too long to disclose his initial purchase of 5 per cent of Twitter’s common shares
The SEC said that at the expense of unsuspecting investors, Musk instead bought more than USD 500 million of Twitter shares at artificially low prices before finally revealing his purchases on April 4, 2022, by which time he owned a 9.2 per cent stake.
Twitter’s share price rose more than 27 per cent following that disclosure, the SEC said.
Tuesday’s lawsuit seeks to force Musk to pay a civil fine and disgorge profits he didn’t deserve.
Musk eventually purchased Twitter for USD 44 billion in October 2022, and renamed it X.
Alex Spiro, a lawyer for Musk, in an email called the SEC lawsuit the culmination of the regulator’s “multi-year campaign of harassment” against his client.
“Today’s action is an admission by the SEC that they cannot bring an actual case,” he said. “Mr Musk has done nothing wrong and everyone sees this sham for what it is.”
Spiro added that the lawsuit addresses a mere “alleged administrative failure to file a single form–an offence that, even if proven, carries a nominal penalty.”
OTHER LAWSUITS OVER TWITTER PURCHASE
Musk, an adviser to US President-elect Donald Trump, is worth USD 417 billion according to Forbes magazine, through businesses such as the electric carmaker Tesla TSLA.O and rocket company SpaceX.
He is worth nearly twice as much as Amazon.com AMZN.O founder Jeff Bezos, the world’s second-richest person at USD 232 billion, Forbes said.
The SEC sued Musk six days before Trump’s Jan. 20 inauguration.
SEC Chair Gary Gensler is stepping down that day, and Paul Atkins, who Trump nominated to succeed him, is expected to review many of Gensler’s rules and enforcement actions.
US watchdog sues Elon Musk over late disclosure of Twitter stake
Musk has also been sued in Manhattan federal court by former Twitter shareholders over the late disclosure.
In that case, Musk has said it was implausible to believe he wanted to defraud other shareholders, and that “all indications” were that his delay was a mistake.
Musk has long feuded with the SEC, including after it sued him in 2018 over his Twitter posts about possibly taking Tesla private and having secured funding to do so.
He settled that lawsuit by paying a USD 20 million civil fine, agreeing to have Tesla lawyers review some Twitter posts in advance, and giving up his role as Tesla’s chairman. The SEC also sought sanctions from Musk after he missed court-ordered testimony last September for the Twitter probe, so he could attend the launch of SpaceX’s Polaris Dawn mission at Florida’s Cape Canaveral.
A federal judge in San Francisco rejected that request, because Musk later testified and agreed to pay the SEC’s travel costs
The Tesla and SpaceX CEO’s failure to notify regulators allowed him to keep buying shares at “artificially low prices”, the SEC said in a filing with the US District Court in the District of Columbia.
Musk’s actions ultimately allowed him to “underpay by at least $150 million for shares he purchased after his beneficial ownership report was due”, the SEC said.
Musk finally informed regulators that he had acquired more than 9 percent of Twitter’s stock on April 4, 2022, 11 days after the disclosure was due, the SEC said.
Twitter’s stock price on that day was up 27 percent from the previous day’s close, according to the regulator.
“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 did not yet reflect the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose,” the securities regulator said.
“In total, Musk underpaid Twitter investors by more than $150 million for his 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 harm.”
US securities regulations require investors who buy more than 5 percent of a company’s shares to disclose their stake so 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 possibly take the electric car company Tesla private.
Musk settled that lawsuit by paying a $20m civil fine, agreeing to have some of his social media activity subject to legal review, and relinquishing his role as Tesla’s chairman.
Musk completed his purchase of Twitter in October 2022 for $44bn, after signing an acquisition deal that he subsequently attempted to back out of.
The SEC’s latest enforcement action, which was announced with little fanfare, comes days before Chair Gary Gensler is due to step down on January 20, the day of US President-elect Donald Trump’s inauguration.
With Thanks and Reference to:https://www.indiatoday.in/world/us-news/story/us-news-elon-musk-sued-for-not-disclosing-stake-in-twitter-before-buying-platform-2664910-2025-01-15 and https://www.aljazeera.com/economy/2025/1/15/us-watchdog-sues-elon-musk-over-late-disclosure-of-twitter-stake
