Billionaire Elon Musk Faces SEC Lawsuit Over Twitter Stake Disclosure
The world’s richest person, Elon Musk, is in hot water with the U.S. Securities and Exchange Commission (SEC) over his delayed disclosure of a significant stake in Twitter. The regulatory body filed a complaint in a Washington, D.C. federal court, alleging that Musk violated federal securities law by waiting 11 days too long to reveal his initial purchase of 5% of Twitter’s common shares.
SEC Rules Require Timely Disclosure
According to SEC rules, investors must disclose their ownership stake within 10 calendar days of crossing the 5% threshold. In Musk’s case, this meant he should have disclosed his purchase by March 24, 2022. However, Musk failed to do so, instead buying more than $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% stake.
Consequences of Delayed Disclosure
The delayed disclosure had significant consequences for unsuspecting investors. Twitter’s share price rose more than 27% following Musk’s eventual revelation, leaving many investors in the dark about the true value of their shares. The SEC is now seeking to force Musk to pay a civil fine and disgorge profits he allegedly didn’t deserve.
Musk’s Response to the Lawsuit
Musk’s lawyer, Alex Spiro, has dismissed the SEC lawsuit as a “multi-year campaign of harassment” against his client. Spiro argues that the lawsuit addresses a mere “alleged administrative failure to file a single form—an offense that, even if proven, carries a nominal penalty.” However, the SEC remains committed to holding Musk accountable for his actions.
A History of Controversy
This is not the first time Musk has clashed with the SEC. In 2018, the regulatory body sued him over his Twitter posts about possibly taking Tesla private and having secured funding to do so. Musk settled that lawsuit by paying a $20 million civil fine and agreeing to have Tesla lawyers review some Twitter posts in advance.
Other Lawsuits and Controversies
Musk is also facing a lawsuit in Manhattan federal court from former Twitter shareholders over the late disclosure. Additionally, he has been involved in a long-standing feud with the SEC, including a dispute over his Twitter posts and a missed court-ordered testimony last September.
The Future of Musk’s Twitter Venture
Musk eventually purchased Twitter for $44 billion in October 2022 and renamed it X. However, the controversy surrounding his delayed disclosure and the ongoing lawsuits may have significant implications for his future ventures. As the world’s richest person, Musk’s actions are under intense scrutiny, and the SEC’s lawsuit serves as a reminder that even the most powerful individuals must comply with regulatory rules.
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