The Securities and Exchange Commission (SEC) has filed a lawsuit against tech billionaire Elon Musk, accusing him of committing securities violations related to his ownership and acquisition of Twitter stock. Filed in a federal court in Washington DC on Tuesday, the suit alleges that Musk failed to disclose his initial 5% stake in Twitter, allowing him to purchase additional shares at "artificially low prices." This move allegedly disadvantaged other shareholders.
The legal action stems from Musk's acquisition of Twitter shares before his eventual $44 billion purchase of the social media platform in 2022, which he later renamed. The SEC claims that Musk's delay in disclosing his stake enabled him to continue buying shares without raising prices, which they argue "stiffed" existing shareholders. The lawsuit represents a significant step by the US financial regulator to address alleged misconduct by high-profile individuals in the stock market.
Alex Spiro, representing Elon Musk, vehemently criticized the SEC’s lawsuit. He dismissed the allegations as an unfounded attack on Musk's business practices.
"has done nothing wrong and everyone sees this sham for what it is" – Alex Spiro
Spiro further stated that the SEC's case is effectively an admission that they lack substantial evidence to support their claims. According to Spiro, the lawsuit is more about optics than legal substance.
The SEC's complaint revolves around Musk's alleged failure to comply with regulatory requirements for timely disclosure of stock ownership exceeding 5%. Such disclosures are crucial as they inform the market and other investors of significant changes in company ownership, potentially impacting stock prices.
Musk's initial 5% stake in Twitter, acquired without timely disclosure, is at the heart of the SEC's accusations. The agency asserts that this non-disclosure allowed Musk to continue acquiring shares at lower costs, which would not have been possible had the market been aware of his initial stake.