SEC Reportedly Investigates Musk For Delay In Disclosing 5% Twitter Stake


Topline

The Securities and Exchange Commission has launched a probe into Elon Musk after he delayed reporting his large stake in Twitter, a move that might have saved him millions of dollars, the Wall Street Journal reported Wednesday—as Musk seeks to purchase Twitter.

Key Facts

The Journal attributed news of the SEC investigation, which has not been publicly confirmed by regulators, to unnamed people familiar with the matter.

Musk acquired a 5% stake in Twitter by March 14, but did not report it to the SEC until April 4, missing the regulatory agency’s 10-day disclosure deadline by more than a week.

After reaching 5% ownership, Musk continued to buy Twitter stock at relatively low prices before publicly disclosing his eventual 9.2% stake in the company in an SEC filing, after which the company’s share price leapt about 27% to $49.97 in one day.

Musk probably saved over $143 million by delaying his disclosure, though it remains to be seen whether the SEC will bring civil charges against Musk, University of Pennsylvania accounting professor Daniel Taylor told the Journal.

Last month, a Twitter shareholder sued Musk over the reporting issue, alleging the billionaire Tesla CEO had cheated shareholders who sold stock in between when Musk acquired 5% ownership and when he filed a disclosure form with the SEC.

The SEC declined to comment on the reported probe to Forbes, and a representative for Musk did not immediately respond to a request for comment.

Key Background

Musk currently owns a 9.2% stake in Twitter, and the company’s board accepted Musk’s offer to buy Twitter outright for $44 billion through a combination of debt and equity. The current reported SEC investigation would not be Musk’s first brush with the agency. In 2018, Musk tweeted that he had secured funding to take Tesla private at $420 per share, causing the company’s stock price to rise. However, the SEC opened a probe into whether the tweets were true. The SEC later said an offer to take Tesla private was far from secure, and Musk agreed in a settlement with the agency to have a Tesla attorney review his tweets before publication. Last month, Judge Lewis Liman rejected Musk’s request to have the settlement thrown out. Musk is also under investigation by the SEC over a November tweet in which he polled his followers on whether he should sell 10% of his Tesla stock. Liman said the tweet was made without the approval of a Tesla attorney, per the terms of the settlement.

Big Number

$224.5 billion. That’s how much Forbes estimates Musk is worth, making him the world’s richest person. However, Musk’s net worth has declined by $31.4 billion since last Friday, as Tesla’s market capitalization fell by 15%.

Further Reading

“Twitter Shareholder Sues Musk, Saying He Misled Investors” (Forbes)



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