In a significant legal development, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Elon Musk on Tuesday, alleging that the billionaire delayed disclosing his substantial Twitter stake in 2022. This delay, according to the SEC, violated federal securities laws and potentially disadvantaged unsuspecting investors.
The SEC’s complaint, filed in Washington, D.C., federal court, accuses Musk of waiting 11 days past the regulatory deadline to disclose his acquisition of 5 percent of Twitter’s common shares. Federal law mandates that investors disclose such purchases within 10 calendar days of crossing the 5 percent ownership threshold, which in Musk’s case was March 24, 2022. However, Musk did not make his disclosure until April 4, 2022, by which time he had accumulated a 9.2 percent stake in the social media giant.
Impact on Twitter Shares and Alleged Gains
The SEC alleges that Musk’s delayed disclosure allowed him to purchase more than $500 million worth of Twitter shares at prices that were artificially low. Following his eventual disclosure, Twitter’s share price surged by over 27 percent, significantly increasing the value of his holdings. The lawsuit seeks to impose a civil fine and recover any unjust profits.
Musk went on to acquire Twitter for $44 billion in October 2022, rebranding the platform as “X.” The SEC’s lawsuit adds to the ongoing legal scrutiny surrounding Musk’s dealings with the social media platform.
ALSO READ: Mark Zuckerberg orders removal of tampons, sanitary pads from men’s washrooms at Meta
Previously, Musk faced lawsuits from former Twitter shareholders for his delayed disclosure, although he has argued that the delay was an unintentional mistake.
Legal Representation Pushes Back
Alex Spiro, Musk’s attorney, criticized the SEC’s lawsuit, describing it as part of a “multi-year campaign of harassment” against his client. Spiro dismissed the claims as addressing a minor administrative lapse, emphasizing that the alleged offense carries only nominal penalties even if proven.
This latest lawsuit is not Musk’s first clash with the SEC. In 2018, he settled a lawsuit over his tweets about taking Tesla private, agreeing to pay a $20 million fine and relinquishing his role as Tesla’s chairman. Additionally, the SEC has previously sought sanctions against Musk for missing court-ordered testimony related to its Twitter probe, though he later complied and covered associated costs.
ALSO READ: Elon Musk’s online behavior raises concerns, biographer says he is unwell
As the SEC’s lawsuit unfolds, it underscores the regulatory body’s focus on ensuring transparency and fairness in the financial markets. For Musk, the case is another chapter in his contentious relationship with regulators, highlighting the complexities and controversies that often accompany his high-profile business ventures.
This lawsuit could set an important precedent for disclosure requirements and investor protections, particularly involving influential figures like Musk, whose decisions have wide-reaching market implications.