SEC accuses Elon Musk of ‘illicit gains’ over failure to report his Twitter stake on time
The Securities and Exchange Commission has filed a lawsuit against Elon Musk dating back to his 2022 acquisition of Twitter, alleging that he was “enriched” to the tune of $150 million by under-reporting the stake he amassed in the social media platform within the company. A five-day window is required, and instead, buy more shares.
The Commission said that his gains came at the expense of other Twitter shareholders. If his initial investment had been announced in a timely manner, the stock price would have risen (as it later did), and Musk’s subsequent investment would have cost him more. Likewise, shareholders who sold before Musk disclosed his stake received a lower price.
SEC rules give investors a five-day window to report an ownership position of 5% or more in a public company, but Musk took longer “in violation of beneficial ownership reporting requirements” under securities law.
According to the SEC complaint, Musk saved at least $150 million at the expense of Twitter shareholders by failing to timely file a beneficial ownership report.
“Congress has enacted beneficial ownership reporting requirements to, among other things, help investors make informed investment decisions by providing information about the accumulation of certain classes of securities by persons who have the ability to change or influence control of the issuing corporations,” the committee said. Securities and exchanges. He said.
According to the complaint, after Musk failed to “timely file a beneficial ownership report” by the required date of March 24, 2022, he purchased more than $500 million worth of Twitter common stock from March 25 to April 1, 2022.
“Allegedly, because Musk failed to timely file a beneficial ownership report with the SEC, he was able to make these purchases of Twitter common stock at artificially low prices from an unsuspecting public, who had not yet priced in the material information that was not Musk’s disclosed beneficial ownership of more than five percent of Twitter’s common stock is for investment purposes.
According to the SEC complaint, Musk paid at least $150 million less for his purchases of Twitter common stock in the period. The complaint also alleges that because Musk failed to timely file a beneficial ownership report with the SEC, investors who sold Twitter common stock between March 25, 2022 and April 1, 2022 did so at artificially low prices and thus suffered significant economic harm.
The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, seeks permanent injunctive relief, “discharge of ill-gotten gains,” pre-judgment interest, and civil penalties.
