Elon Musk Faces SEC Lawsuit Over Twitter Stake Disclosure

The Securities and Exchange Commission has filed a lawsuit against Elon Musk, accusing him of failing to disclose his substantial stake in Twitter until it was too late, resulting in significant financial implications for shareholders.

The U.S. Securities and Exchange Commission (SEC) has initiated legal proceedings against Elon Musk, asserting that the billionaire neglected to promptly disclose his acquisition of a substantial stake in Twitter, which led to the delayed reporting of his holdings and enabled him to acquire shares at "artificially low prices." According to the SEC's complaint, Musk saved $150 million by not revealing that his ownership had crossed the 5% threshold—a requirement under SEC regulations that demands such disclosures within ten days. The complaint highlights that Musk made the necessary disclosure 21 days after exceeding the threshold.

In reaction to the lawsuit, Musk publicly criticized the SEC on social media, labeling the agency a "totally broken organization" and implying that the regulator was misallocating resources by focusing on his case instead of addressing more serious crimes. The SEC contended that Musk's failure to disclose his stake caused substantial economic harm to Twitter investors. Musk’s attorney, Alex Spiro, denounced the lawsuit, calling it a "sham" and suggesting it represented continued harassment of his client.

Following Musk’s public confirmation of his share purchase on April 4, 2022, Twitter's share prices surged by over 27%. This increase was a prelude to Musk's eventual acquisition of the platform for $44 billion in October of the same year, a deal that resulted in a rebranding of the platform to "X."

The SEC’s complaint was filed in a Washington D.C. federal court on Tuesday, with the regulatory body seeking an order for Musk to relinquish "unjust" profits gained from the alleged violation and to impose a financial penalty. The current SEC chairman, Gary Gensler, announced plans to resign from his position upon the return of Donald Trump to the White House on January 20, 2024, following Trump's remarks indicating intentions to remove Gensler immediately upon taking office.

This recent lawsuit is not Musk's first contention with the SEC; he previously faced charges in 2018 for allegedly deceiving investors with claims regarding securing funding to take Tesla private. Musk resolved those charges by stepping down as the chairman of Tesla's board and agreeing to restrictions on his social media communications regarding the company.