US watchdog sues Elon Musk over late disclosure of Twitter stake technology

The US Securities and Exchange Commission says Musk’s failure to disclose his stake allowed him to pay less than $150 million for the shares.

The US Securities Exchange Commission has filed a lawsuit against Elon Musk, alleging that he did not disclose his stake in Twitter on time before purchasing the social media platform.

The US Securities and Exchange Commission (SEC) said on Tuesday that Musk failed to disclose within the required ten-day period that he had acquired more than 5% of Twitter shares in March 2022.

The Tesla and SpaceX CEO’s failure to notify regulators allowed him to continue purchasing shares at “artificially low prices,” the SEC said in a filing with the US District Court for the District of Columbia.

Musk’s actions ultimately allowed him to “pay at least $150 million less for the shares he purchased after the beneficial ownership report was due,” the SEC said.

Musk finally informed regulators that he acquired more than 9% of Twitter shares on April 4, 2022, 11 days after the disclosure was scheduled, the SEC said.

Twitter’s stock price that day rose 27 percent from the previous day’s close, according to the regulator.

“Because Musk failed to disclose his beneficial ownership in a timely manner, he was able to make these purchases from the unsuspecting public at artificially low prices, which did not yet reflect material non-public information about Musk’s beneficial ownership of more than five percent of the common stock of Twitter and the securities regulator said: “Investment purpose.”

“In total, Musk paid Twitter investors less than $150 million for his purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered significant economic harm.”

U.S. securities regulations require investors who buy more than 5 percent of a company’s shares to disclose their stake so shareholders can make informed decisions about investments.

The SEC has sued Musk twice before, including a 2018 Twitter post in which he claimed he had secured financing to potentially take electric car company Tesla private.

Musk settled that lawsuit by paying a $20 million civil fine, agreeing to subject some of his social media activities to legal review, and relinquishing his role as Tesla’s chairman.

Musk completed his purchase of Twitter in October 2022 for $44 billion, after signing a takeover deal that he later tried to back away from.

The SEC’s latest executive action, announced without much fanfare, comes days before Chairman Gary Gensler resigns from office on January 20, the inauguration day of US President-elect Donald Trump.

It is unclear whether the lawsuit against Musk, one of Trump’s most influential allies, will continue under Trump, who appointed Paul Atkins, the former commissioner of the Securities and Exchange Commission, to succeed Gensler.