SEC Sues Elon Musk Over Delayed Disclosure of Twitter Stock Ownership

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against billionaire Elon Musk, accusing him of failing to disclose his early Twitter stock purchases within the legally required timeframe. According to NPR, the agency claims that this delay allowed Musk to save at least $150 million while acquiring shares of the social media platform, which he later bought outright and rebranded as X.

Musk began purchasing shares of Twitter in early 2022, and by March of that year, his holdings surpassed 5% of the company’s stock. Under U.S. securities laws, investors who acquire more than 5% of a public company are required to disclose their ownership within 10 days. However, per NPR, Musk allegedly waited until April 4 to make the required disclosure—11 days after the deadline had passed.

The SEC contends that Musk’s delayed disclosure impacted the market by keeping Twitter’s stock price artificially low, enabling him to buy additional shares at a discount. The lawsuit asserts that had Musk disclosed his stake on time, the price of Twitter shares would have risen, costing him significantly more to complete his purchases.

Related: Elon Musk Faces SEC Sanctions After Missing Testimony on Twitter Deal

After Musk disclosed his growing stake in Twitter, he quickly moved to acquire the entire company. NPR reports that he signed an agreement to buy the platform in April 2022 but later tried to back out of the deal, prompting Twitter to file a lawsuit to compel him to follow through. The acquisition was finalized in October 2022, and Musk subsequently renamed the platform X.

The SEC’s current complaint is the latest development in its investigation into Musk’s handling of the Twitter acquisition. According to NPR, the agency began looking into possible securities law violations in April 2022, shortly after Musk made his disclosure. The investigation has also focused on his public statements and SEC filings related to the deal.

Before filing the lawsuit, the SEC sought a court order to compel Musk to testify as part of the investigation. However, Musk resisted the agency’s attempts, leading to the current legal action.

It remains unclear how the case will proceed, especially as the SEC prepares for a leadership change. NPR notes that SEC Chair Gary Gensler is set to step down from his position on January 20, 2025, raising questions about whether the next administration will continue to pursue the case with the same intensity.

Source: NPR