SEC Sues Elon Musk Over Late Twitter Stock Disclosure

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against billionaire Elon Musk, accusing him of failing to disclose his significant ownership of Twitter stock within the legally required timeframe in early 2022. The SEC claims this delay allowed Musk to save at least $150 million on shares he purchased before completing his acquisition of the social media platform.

Musk began purchasing Twitter shares in early 2022, crossing the 5% ownership threshold by March. Under federal securities laws, Musk was required to publicly disclose his holdings once they exceeded 5%. However, the SEC’s complaint states that Musk delayed disclosure until April 4, 2022—11 days past the deadline.

Allegations of Financial Advantage

The SEC contends that Musk’s late disclosure enabled him to purchase additional shares at lower prices, significantly undervaluing his subsequent investment. Musk finalized his acquisition of Twitter in October 2022 for $44 billion, later rebranding the platform as “X.”

In a statement accompanying the lawsuit, the SEC indicated that its investigation, initiated in April 2022, sought to determine whether Musk violated securities laws during his acquisition of Twitter stock. The agency also examined his public statements and filings related to the transaction.

Previous Legal Disputes

Musk’s acquisition of Twitter has been fraught with legal challenges. After signing an agreement to purchase the company in April 2022, Musk attempted to withdraw from the deal, citing concerns over the platform’s user data and bot accounts. Twitter subsequently filed a lawsuit to compel Musk to honor the agreement, leading to his eventual completion of the purchase.

Efforts to Compel Testimony

Prior to filing its lawsuit, the SEC sought to compel Musk’s testimony as part of its investigation. Musk resisted, resulting in legal battles over his obligation to cooperate with regulatory authorities.

Leadership Changes at the SEC

The lawsuit’s trajectory was affected by leadership changes at the SEC. Chair Gary Gensler steped down on January 20, raising uncertainty about the lawsuit’s continuation under the next administration.

Representatives for Musk and his company, X, have not yet responded to requests for comment. The case underscores the ongoing scrutiny of Musk’s business practices and their broader implications for corporate governance and securities regulation.