The SEC has filed a lawsuit against Elon Musk, accusing him of violating federal securities laws by delaying the disclosure of his Twitter stock ownership.
Allegations of Delayed Disclosure
The SEC's lawsuit, filed on Tuesday in a Washington, D.C. federal court, accuses Musk of failing to disclose his purchase of over 5% of Twitter shares within the required 10-day period. By law, investors must report such a stake within 10 calendar days of surpassing the 5% threshold. However, Musk delayed his disclosure by 11 days beyond the March 2022 deadline. This allowed him to purchase Twitter shares worth over $500 million at a discount before his acquisition became public. When he finally disclosed his 9.2% stake on April 4, 2022, Twitter’s share price surged by more than 27%, benefiting Musk.
Financial Impact and Investor Consequences
The SEC argues that Musk's late disclosure harmed other investors by preventing them from making informed decisions about Twitter's stock. According to the SEC, had the public known about Musk’s interest in the company sooner, the stock price would likely have risen, causing investors to pay higher prices for their shares. Consequently, the SEC claims that Musk underpaid by at least $150 million for the Twitter shares he purchased after the required filing deadline.
Musk's Response and Criticism of the SEC
Elon Musk responded to the SEC's lawsuit on X, calling the organization a 'totally broken' entity. He criticized the SEC for focusing on what he called a minor issue while other significant crimes remain unaddressed. Musk's criticism reflects his long-standing conflict with the regulatory body, especially over past investigations and settlements. Musk’s legal team, led by Alex Spiro, argued that the lawsuit was a culmination of the SEC’s 'multi-year campaign of harassment' against Musk. According to Spiro, the case is based on a 'mere administrative failure to file a single form,' which, if proven, carries a nominal penalty. He maintained that Musk had done nothing wrong and dismissed the lawsuit as a baseless attack.
This lawsuit is part of the ongoing conflict between Elon Musk and the SEC, periodically arising due to his business and personal activities.