In a recent legal challenge, the SEC claims Musk's delay harmed investors and violated disclosure rules.
Elon Musk Faces SEC Lawsuit Over Delayed Twitter Stake Disclosure
Elon Musk Faces SEC Lawsuit Over Delayed Twitter Stake Disclosure
The SEC alleges Musk profited $150 million by failing to report his Twitter stake on time.
The U.S. Securities and Exchange Commission (SEC) has initiated a lawsuit against billionaire entrepreneur Elon Musk, asserting that he neglected to appropriately disclose his acquisition of a significant stake in Twitter, which enabled him to purchase shares at “artificially low prices.” The SEC's complaint, filed in a federal court in Washington D.C., highlights that Musk's actions reportedly saved him around $150 million in share transactions.
SEC regulations mandate that any investor whose holdings exceed 5% of a public company have a strict ten-day window to report that threshold. However, Musk reportedly failed to comply, disclosing his stake 21 days after the acquisition, according to the lawsuit. In response to these allegations, Musk labeled the SEC a “totally broken organization,” implying the regulator was misallocating its resources while numerous “actual crimes” go unchecked.
The SEC contends that Musk’s failure to report had pronounced economic repercussions for Twitter shareholders. In a statement provided to BBC News, Musk's attorney, Alex Spiro, dismissed the lawsuit as a "sham" and characterized it as a persistent campaign of harassment against his client.
The SEC's filing further notes that following Musk's eventual public revelation of his stake in Twitter on April 4, 2022, the social media platform’s stock price surged by over 27%. Musk would later proceed to acquire Twitter for an eye-watering $44 billion in October 2022, subsequently rebranding the platform as X.
In its complaint, the SEC is seeking a court order for Musk to return “unjust” profits and pay a civil penalty. This latest lawsuit comes amid scrutiny surrounding Musk’s previous encounters with the SEC. As recent as 2018, Musk faced charges for misleading investors, claiming he had “funding secured” to take Tesla private. He ultimately settled those charges, which included stepping down as chairman of Tesla's board and accepting restrictions on his social media communication regarding the company.
With changes at the SEC anticipated alongside the upcoming 2024 presidential election—with current head Gary Gensler announcing his resignation if Donald Trump takes office—Musk’s ongoing legal challenges with the SEC may intensify in the coming months.
