Bulletins

Elon Musk didn't follow the rules when he bought his Twitter stake

He should have disclosed his stake in late March. The delay may have saved him hundreds of millions of dolllars.

Elon Musk looking at a stock chart

Musk may have saved hundreds of millions of dollars by ignoring SEC rules.

Image: Daniel Oberhaus (2018) / Google Finance / Protocol

How did Elon Musk accumulate a 9.2% stake in Twitter without the world noticing? The most likely answer — and a running theme in his career — is that he broke the rules.

SEC rules require most individuals who accumulate a stake of 5% or more in a company to disclose it in a Schedule 13G filing within 10 days of the event, meaning the purchase, transfer or other means by which they got their hands on the shares. Given the way trades settle, there’s been some uncertainty over which date to use, but in 2016, the SEC said the clock starts the day after the trade date.


Musk’s filing gives the date of the event as March 14, which would mean he should have filed on March 24. Instead, he filed on April 4, disclosing a stake of more than 73 million shares, well above the 5% filing threshold. What happened in between?

Traders who examined activity in Twitter shares offered the following insights.

Before Monday’s filing, Twitter’s typical trading volume in recent weeks was 17 million shares a day. They estimated that traders working on Musk’s behalf could buy at most 3 million shares a day without noticeably moving the stock. Let’s assume, as our trader sources did, that Musk bought a stake just below 5%, or roughly 40 million shares, before March 24, and crossed the 5% threshold on that date, which his filing suggests. (Notably, there was a big jump in volume on March 18.)

It’s possible that Musk’s traders hadn’t gotten to his target stake by March 24. At that point, Musk may have faced a choice: File on time and see Twitter shares rise dramatically in price, as it did on Monday, or delay the filing and buy more shares at a cheaper price.

If that transpired, Musk’s savings would be substantial, in the hundreds of millions of dollars. And investors who sold shares to him in the last week of March, not knowing he was accumulating a large stake in the company, have corresponding losses.

The fines the SEC has handed out for similar violations are a parking ticket for a man of Musk’s wealth. (The SEC is considering new rules which would require much faster disclosures, by the way.) Securities lawyers might have more luck extracting a payout from selling shareholders.

All of this does raise a question for Twitter, which just announced it would name Musk to its board: You now have a director who has been charged with securities fraud and repeatedly both expressed in words and demonstrated in action his contempt for the Securities and Exchange Commission and its rules. Any qualms about him overseeing your corporate governance?

Max A. Cherney contributed to this report.

Latest Bulletins

As pressure mounts on Big Tech to do more to protect the youngest users, Snap is launching a new family center that will allow parents to see who their kids are friends with on Snap and report suspicious accounts.

It’s part of a wave of new kid safety features being launched by tech giants, including Meta and Apple. But Snap has an arguably bigger hill to climb in implementing these features than either of those companies. To get parents of teens to use Snap’s parental controls, first, parents of teens need to actually use Snap.

Keep Reading Show less

As pressure mounts on Big Tech to do more to protect the youngest users, Snap is launching a new family center that will allow parents to see who their kids are friends with on Snap and report suspicious accounts.

It’s part of a wave of new kid safety features being launched by tech giants, including Meta and Apple. But Snap has an arguably bigger hill to climb in implementing these features than either of those companies. To get parents of teens to use Snap’s parental controls, first, parents of teens need to actually use Snap.

Keep Reading Show less

North Korean hackers used Tornado Cash, a mixer platform for cryptocurrencies, to launder funds. That's according to the U.S. Treasury Department, which imposed sanctions on the USDC and ETH wallet addresses associated with the protocol Monday.

Keep Reading Show less

Google has filed a new patent infringement lawsuit against Sonos, alleging the violation of four patents. Most of the claims focus on voice assistant functionality; Google alleges that Sonos began violating its patents when Sonos introduced its own voice assistant this summer.

Keep Reading Show less

Twilio disclosed that a cyberattack involving the theft of employee credentials allowed attackers to access data from "a limited number" of customer accounts.

Keep Reading Show less

Block reported second-quarter earnings that just topped analysts’ estimates, but shares fell as investors digested the effect of the macroeconomic environment on the company’s core payments businesses. Bitcoin volume also dragged on total revenue.

Keep Reading Show less

Meta announced Thursday it had banned Cyber Front Z, a pro-Russia troll group that purported to mobilize harassment by supporters of Vladimir Putin's war in Ukraine through a public Telegram channel.

Keep Reading Show less

Coinbase said Thursday that it has partnered with BlackRock to give the world’s biggest asset manager’s clients access to bitcoin and other cryptocurrencies.

Keep Reading Show less

Workers at Blizzard Albany, a subsidiary of game publisher Activision Blizzard formerly known as the studio Vicarious Visions that works on the popular Diablo franchise, said on Wednesday that studio management plans to fight their decision to unionize with the Communications Workers of America.

Keep Reading Show less

Binance co-founder Yi He will take over Binance Labs, the crypto powerhouse’s multibillion-dollar venture capital arm, the company said Wednesday.

Keep Reading Show less

While the $280 billion Chips Act is largely focused on bolstering the U.S. semiconductor industry, it could also be a game changer for carbon dioxide removal. Buried within the sprawling bill is an authorization for research into the technology that, while not proven at scale, could nevertheless play an important role in addressing climate change.

Keep Reading Show less

A new Senate bill would give the Commodity Futures Trading Commission authority over the markets for bitcoin and ether, the two largest cryptocurrencies.

Keep Reading Show less

Robinhood said Tuesday that it was cutting more jobs as CEO Vlad Tenev acknowledged that the company got 2022 market trends wrong.

Keep Reading Show less

PayPal reported second-quarter earnings that beat analyst estimates, adding hopes for investors that the payments giant was seeing a bounce-back from its previous quarter, when economic jitters wiped out the company's pandemic gains.

Keep Reading Show less

Hackers stole nearly $200 million in cryptocurrency after the Nomad crypto bridge protocol was breached.

Keep Reading Show less

Robinhood has been fined $30 million by New York's top financial regulators over alleged shortcomings in the company's anti-money laundering and cybersecurity practices.

Keep Reading Show less

Real estate iBuyer Opendoor has settled charges with the FTC, agreeing to pay $62 million and cease practices the FTC called "deceptive."

Keep Reading Show less

Big Tech is trying to save college affirmative action. A slew of tech companies, including Meta, Google and Apple, filed a brief with the U.S. Supreme Court on Monday signaling support for affirmative action programs at Harvard.

Keep Reading Show less

The Nuclear Regulatory Commission is about to do something it hasn’t done in years: certify the design for a brand new reactor.

Keep Reading Show less

The SEC has filed charges against 11 people involved in an international "crypto pyramid and Ponzi scheme" that raised more than $300 million from millions of investors.

Keep Reading Show less

A bet on banking doesn't seem to have saved troubled fintech LendUp. Parent company LendUp Global has reportedly begun liquidating assets, including its neobank subsdiary, through an assignment for the benefit of creditors, a quieter alternative to a public bankruptcy.

Keep Reading Show less

After admonishing crypto lender Voyager Digital for "false and misleading" statements on the subject, the FDIC said banks must ensure that crypto firms they partner with are clear about whether customer deposits are insured.

Keep Reading Show less

The ad market is starting to get very rocky: Roku warned investors about a “significant slowdown in TV advertising spend” as it reported its second-quarter earnings Thursday.

Keep Reading Show less

Intel issued a grim quarterly report card Thursday, telling investors that the company’s ever-important data center and AI business revenue declined 16% to $4.6 billion.

Keep Reading Show less

What a difference two weeks and a name change makes: Sen. Joe Manchin left the Build Back Better Act for dead (twice). But late Wednesday, the West Virginia senator and Sen. Majority Leader Chuck Schumer said they reached an agreement to spend $369 billion to turn the climate tide. It's nowhere near enough funding to save the planet, but it will help get clean energy tech deployed more rapidly and inch the U.S. closer to meeting President Joe Biden's climate goals.

Keep Reading Show less
Bulletins