SEC Files Lawsuit Against Elon Musk Over Twitter Acquisition Disclosure
The Securities and Exchange Commission has initiated legal proceedings against Elon Musk, accusing him of breaching securities regulations in relation to his acquisition of Twitter, which has since been rebranded as X.
Allegations of Delayed Disclosure
According to a complaint lodged in a federal court in Washington DC, the SEC charges that Musk failed to promptly disclose his 5% stake in Twitter, contravening federal securities laws. The SEC suggests that Musk delayed his disclosure to acquire a larger share of Twitter at a reduced price.
Timing of the Lawsuit
This lawsuit emerges in the final week of Gary Gensler's tenure as the chairman of the SEC, who is set to resign on January 20. Over the past four years, there have been multiple confrontations between Gensler and Musk, most recently highlighted by Musk's mockery of an SEC settlement offer on X.
Musk's Disclosure Timing Questioned
The SEC's complaint indicates that Musk disclosed his Twitter acquisition 11 days later than required. After reaching a 5% stake in Twitter on March 24, 2022, Musk was obliged to file a beneficial ownership report with the SEC, but only did so on April 4, 2022.
Increased Stake and Market Impact
During the interim disclosure period, Musk is alleged to have expanded his stake in Twitter from 5% to 9%. On the disclosure day, Twitter's stock surged by 27% compared to the previous day's closing price. The SEC claims this maneuver enabled Musk to save more than $150 million on his acquisition.
SEC's Proposed Penalties
The SEC has proposed that Musk should return the unjust profits and also pay a civil penalty. A federal court will ultimately assess the merits of these allegations and decide on any fines against Musk.
Response from Musk's Legal Team
"As the SEC retreats and leaves office, the SEC's multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky-tack complaint against Mr. Musk," said Alex Spiro, Musk’s lawyer, in light of the SEC's complaint.
Spiro further characterized the SEC's actions as an "admission" of its inability to sustain a substantial case against Musk, dismissing the complaint as trivial.
Future of SEC Leadership
President-elect Donald Trump has nominated Paul Atkins, who previously served as an SEC Commissioner during the Bush administration, to succeed Gensler. Known for more lenient views towards regulation, Atkins' appointment could signify a potentially more favorable regulatory landscape for Musk and other allies of Trump.