The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, accusing the billionaire of failing to disclose his acquisition of a significant stake in Twitter (now X) within the required timeframe. This alleged delay allowed Musk to purchase shares at what the SEC describes as “artificially low prices,” saving him approximately $150 million.
Key Allegations and Timeline
- Disclosure Rules Violation: SEC regulations mandate that investors report when their holdings exceed 5% within 10 days. Musk, however, disclosed his 9.2% stake 21 days late, on April 4, 2022.
- Economic Impact: After Musk’s disclosure, Twitter’s stock price surged by more than 27%. The SEC claims this delay caused “substantial economic harm” to other investors.
- Legal Demands: The SEC seeks to recover Musk’s “unjust” profits, impose fines, and ensure compliance with disclosure rules.
Musk’s Response
Musk labeled the SEC as a “totally broken organization” in a social media post, accusing it of neglecting more pressing crimes. His lawyer, Alex Spiro, dismissed the lawsuit as a “sham” and part of a “campaign of harassment” against Musk.
Musk’s History with the SEC
This isn’t Musk’s first SEC clash. In 2018, he faced charges for misleading investors by tweeting about taking Tesla private with “funding secured.” The case resulted in Musk stepping down as Tesla’s board chairman and agreeing to oversight of his social media activity concerning the company.
Broader Implications
The SEC’s lawsuit comes amid political and regulatory shifts. Gary Gensler, the current SEC Chair, has announced plans to resign as Donald Trump returns to the White House. Musk, a known Trump ally, has previously clashed with the SEC under Gensler’s leadership, adding a layer of political tension to the case.
Twitter to X
Musk eventually acquired Twitter for $44 billion in October 2022, rebranding it as X. The platform’s share price surge following Musk’s disclosure underscores the stakes in adhering to SEC regulations.
Conclusion
The SEC’s lawsuit highlights the importance of transparency in financial markets. As the legal battle unfolds, it serves as a stark reminder of the regulatory challenges even the wealthiest and most influential figures face.