Among the many strange things about Elon Musk's revelation of his large stake in Twitter, there was the particular form he used to reveal it. Buckle up: We're about to dive deep into the wonderful world of SEC filings.
Musk disclosed his stake in a Schedule 13G filing Monday, used by investors who are taking a passive stake in a company, which means he didn't plan to seek control of the company or influence its policies. That was promptly contradicted by Twitter's announcement that it planned to name Musk to the board, as well as his barrage of tweets in March where he, well, sought to influence Twitter's policies.
The SEC website, like Twitter at present, lacks an edit button, so Musk filed a new, different form, a Schedule 13D. Since Twitter CEO Parag Agrawal admitted Twitter and Musk had been having conversations about him joining the board for weeks, it's likely he should have filed that form in the first place.
He also should have filed on March 24, his new filing shows. That's 10 days after the date at which his holdings exceeded the 5% threshold that requires disclosure, as SEC rules require.
Musk's new filing also gives us an idea of how much Twitter investors lost by selling to Musk without knowing of his intentions. Traders sent shares soaring Monday, suggesting investors view a Twitter partially owned by Musk as more valuable. Musk paid $2.6 billion for his shares, which are now worth $3.8 billion. A quick calculation shows that investors who sold him shares between $38.20 and $40.30 between March 24 and April 1 missed out on $165 million, assuming shares would have jumped similarly in price had Musk made his filing on time.
Musk would have still profited massively from his acquisition had he made the disclosure on time.
By March 24, Musk had acquired a 7.5% stake in Twitter. He increased his stake to 9.1% by the time of his late filing. He also agreed not to buy more than 14.9% of the company's shares, according to the filing, in exchange for taking a board seat. "Any future acquisitions of Common Stock will be subject to the Company’s policies, including its insider trading policy, as applicable," the filing stated.
Musk has expressed contempt for the Securities and Exchange Commission, which he has tangled with before. His filing about the Twitter stake discloses, as required, that he reached a settlement with the SEC about earlier charges of securities fraud which revolved around — wouldn't you know it? — a tweet.
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