The Securities and Exchange Commission (SEC) has taken legal action against Elon Musk, alleging that he failed to properly disclose his significant stake in Twitter. The lawsuit, filed on Tuesday in a federal court in Washington DC, contends that Musk's oversight allowed him to acquire shares at "artificially low prices," thereby causing substantial economic harm to investors. Musk publicly revealed his share purchase a full 21 days after the acquisition, during which Twitter's share price rose by more than 27%.
According to SEC regulations, investors who exceed a 5% stake in a company must report this within ten days. The complaint asserts that Musk breached this rule, resulting in an estimated $150 million (£123 million) savings on share purchases. The SEC is seeking a court order for Musk to relinquish these "unjust" profits and to impose a financial penalty.
The timing of Musk's public disclosure played a pivotal role in the SEC's allegations. By delaying the announcement of his stake, Musk was able to buy shares before the market could react to his involvement, effectively securing a financial advantage. Consequently, this delay allegedly deprived other investors of the opportunity to benefit from the rise in Twitter's stock price following his announcement.
Musk's legal team has yet to respond to requests for comment on the matter, as reported by BBC News. This lawsuit forms part of a broader scrutiny of Musk's financial activities, particularly his purchase of Twitter for $44 billion in October 2022. Since acquiring the platform, Musk has rebranded it as X.
The SEC's lawsuit not only seeks financial restitution but also aims to underscore the importance of timely and accurate disclosures by influential investors. This case highlights the potential ramifications of non-compliance with securities regulations, especially for high-profile figures like Musk.