The Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk after a lengthy investigation, accusing him of failing to promptly disclose his stock purchases on Twitter before announcing his intent to acquire the company in 2022. According to the SEC, Musk violated federal law by not publicly reporting his purchase of more than 5% of Twitter shares within the required 10-day period. This delay allowed Musk to continue buying Twitter stock while other investors were unaware of his growing involvement in the company.
The SEC’s lawsuit claims that Musk’s failure to disclose his beneficial ownership of Twitter shares resulted in significant financial harm to other investors. During the period in which Musk did not disclose his stake, he is alleged to have spent over $500 million acquiring additional Twitter shares at artificially low prices.
As a result, other investors who sold their shares at that time were unaware of Musk’s larger stake and, therefore, sold at prices that did not reflect the true value of the stock. The SEC estimates that Musk underpaid Twitter shareholders by more than $150 million during this period.
Elon Musk
This legal action is the latest in a series of confrontations between Musk and the SEC. The regulator has been investigating Musk for years, particularly over his involvement with Twitter. Musk and the SEC have had a contentious relationship, with Musk previously accused of using tactics to delay the investigation. In December, Musk’s lawyer, Alex Spiro, sent a letter to SEC Chair Gary Gensler accusing the agency of harassing Musk for six years and rejecting a settlement offer related to the Twitter investigation.
In addition to the SEC’s lawsuit, Musk faces a class action lawsuit from other Twitter investors and an investigation by the Federal Trade Commission (FTC) regarding the delayed disclosure. However, there is uncertainty about how much impact the SEC’s lawsuit will have, as it is speculated that SEC Chair Gary Gensler may step down following the inauguration of President Donald Trump, which could affect the outcome of the case.
Musk’s company, X (formerly known as Twitter), did not immediately comment on the SEC’s lawsuit. Musk’s lawyer, Alex Spiro, dismissed the SEC’s lawsuit as a “ticky-tack complaint” in a statement to The New York Times, suggesting that the SEC had no substantial case to pursue and that the legal action was merely an attempt to draw attention without real substance.
