Elon Musk faces a lawsuit from the SEC for allegedly not disclosing his Twitter stake in a timely manner, resulting in financial benefits at the expense of shareholders. Musk and his lawyer have criticized the lawsuit as unfounded and a continuation of harassment.
SEC Files Lawsuit Against Elon Musk Over Twitter Stake Disclosure
SEC Files Lawsuit Against Elon Musk Over Twitter Stake Disclosure
The U.S. Securities and Exchange Commission alleges Musk failed to disclose significant Twitter shares, potentially harming investors.
The U.S. Securities and Exchange Commission (SEC) has initiated legal action against billionaire entrepreneur Elon Musk, asserting that he neglected to disclose his substantial stake in Twitter in a timely manner. The SEC claims that this lack of disclosure allowed Musk to purchase Twitter shares at what the agency describes as "artificially low prices," ultimately resulting in a financial advantage of approximately $150 million for him.
Under regulations set forth by the SEC, investors who acquire over 5% of a company's holdings are required to report this crossing of the threshold within ten days. However, the agency alleges that Musk failed to make this disclosure until 21 days after the purchase. In response to the legal action, Musk has publicly criticized the SEC, calling it a "totally broken organization" and accusing it of misdirecting resources while more significant offenses go unchecked.
The SEC’s complaint claims that Musk's delayed reporting had detrimental financial consequences for investors. Musk's attorney, Alex Spiro, has labeled the lawsuit a "sham" and characterized it as an ongoing "campaign of harassment" directed at Musk.
Following the public announcement of his share acquisition on April 4, 2022, Twitter's stock price experienced a substantial increase of over 27%. Musk eventually solidified his ownership of Twitter in October 2022 for $44 billion, subsequently rebranding the platform as X.
This lawsuit was filed in a federal court in Washington D.C. on Tuesday, with the SEC seeking to compel Musk to forfeit any "unjust" profits and pay a fine for his alleged misconduct. Notably, the SEC is led by Gary Gensler, who has indicated he will resign from his position if Donald Trump returns to the presidency on January 20, a potential scenario that includes Trump's intention to replace Gensler immediately upon taking office. Musk's contentious relationship with the SEC precedes Gensler's tenure; in 2018, he faced SEC charges for misleading investors regarding Tesla financing, leading to a settlement that required him to step down as chairman and adhere to specific communications constraints.
