SEC Charges Elon Musk for Failing to Disclose Twitter Shareholdings

The SEC has sued Tesla CEO Elon Musk for allegedly failing to disclose his Twitter stock ownership, allowing him to buy shares at undervalued prices. The lawsuit claims Musk's actions underpaid investors by over $150 million. Musk's lawyer argues the SEC's case is insubstantial and without merit.

The U.S. Securities and Exchange Commission has initiated legal action against Tesla CEO Elon Musk, accusing him of inadequately revealing his stakes in X, formerly known as Twitter, enabling him to acquire shares at "artificially low prices," CNN reports. Before finalizing his $44 billion acquisition of Twitter in October 2022, Musk had begun substantial purchases of Twitter shares. By March 2022, his holdings exceeded 5 percent, necessitating disclosure to the SEC within ten days, a requirement Musk allegedly neglected until April 4, 2022.

The lawsuit contends that had Musk disclosed his ownership as mandated, Twitter's stock price would have surged. Elon Musk's lawyer, Alex Spiro, responded to CNN, asserting that "Musk has done nothing wrong," labeling the action an acknowledgment by the SEC of its inability to mount a cogent case. Spiro criticized the SEC's persistent probing of Musk, culminating in what he termed a trivial complaint relating to an alleged administrative lapse under Section 13(d), a charge accompanied by minimal penalties, even if verified.

As detailed in a DC federal court filing, Musk's efforts to keep purchase prices down allegedly resulted in undercompensating Twitter investors by over $150 million during this transaction period. The SEC claims Musk's stake surged past 7 percent by March 24, 2022, followed by the acquisition of an additional 3.5 million shares while discussing a takeover offer with Twitter's board. By the time Musk declared his stake, owning upwards of 9 percent, Twitter's shares had jumped over 27 percent. The SEC asserts he paid significantly less for shares acquired from March 25, 2022, to April 1, 2022, spending over $500 million according to CNN.

This lawsuit emerges just before SEC Chair Gary Gensler's impending departure. Musk has had a protracted history of clashes with Gensler over his dealings with X. Recently, Musk disclosed via social media that the SEC had previously pressured him to pay an undisclosed fine to settle accusations regarding his Twitter shares purchases, supported by a letter from his attorney Alex Spiro. Former difficulties with the commission arose last year when Musk declined to give testimony during an investigation. (ANI)

(With inputs from agencies.)