Elon Musk is being sued by the securities regulator in the United States for allegedly not disclosing his stake in Twitter on time before he bought the social media platform.
The US Securities and Exchange Commission (SEC) said on Tuesday that Musk failed to disclose within the required 10-day period that he acquired more than 5 percent of Twitter’s stock in March 2022.
The Tesla and SpaceX CEO’s failure to notify regulators allowed him to keep buying shares at “artificially low prices”, the SEC said in a filing with the US District Court in the District of Columbia.
Musk’s actions ultimately allowed him to “underpay by at least $150 million for shares he purchased after his beneficial ownership report was due”, the SEC said.
Musk finally informed regulators that he had acquired more than 9 percent of Twitter’s stock on April 4, 2022, 11 days after the disclosure was due, the SEC said.
Twitter’s stock price on that day was up 27 percent from the previous day’s close, according to the regulator.
“Because Musk failed to timely disclose his beneficial ownership, he was able to make these purchases from the unsuspecting public at artificially low prices, which did not yet reflect the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose,” the securities regulator said.
“In total, Musk underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm.”
US securities regulations require investors who buy more than 5 percent of a company’s shares to disclose their stake so shareholders can make informed decisions about investments.
The SEC has sued Musk twice before, including over a 2018 Twitter post in which he claimed he had secured funding to possibly take the electric car company Tesla private.
Musk settled that lawsuit by paying a $20m civil fine, agreeing to have some of his social media activity subject to legal review, and relinquishing his role as Tesla’s chairman.
Musk completed his purchase of Twitter in October 2022 for $44bn, after signing an acquisition deal that he subsequently attempted to back out of.
The SEC’s latest enforcement action, which was announced with little fanfare, comes days before Chair Gary Gensler is due to step down on January 20, the day of US President-elect Donald Trump’s inauguration.
It is unclear if the lawsuit against Musk, one of Trump’s most influential allies, will continue under Trump, who has named Paul Atkins, a former SEC commissioner, as Gensler’s successor.
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