Bulletins

The SEC has so many questions for Elon Musk

Like: Why did you put all of these apparently untrue statements in a regulatory filing?

Elon Musk in a pile of money.

The SEC has questions for Elon Musk

Illustration: Protocol

The SEC would like Elon Musk to explain himself. In a letter the agency sent Musk last month, released Friday, a top SEC lawyer asked pointed questions about filings Musk made about his growing stake in Twitter.


The questions centered on straightforward violations of SEC rules that were readily apparent from the time Musk made filings in April revealing he had accumulated a large stake in Twitter.

SEC senior special counsel Nicholas Panos asked:

  • How Musk concluded that March 14 was the date of the event that prompted his need to disclose his stake
  • Why his filing disclosing that stake did not come within 10 days of that event
  • Why he filled in a box asking if he intended to change, influence or control Twitter as "N/A," or "not applicable"
  • Why he filed a form used by passive investors, not active investors
Some of these questions have already been answered through filings made by Musk or Twitter. A Musk filing showed that March 14 was the date at which his stake in Twitter exceeded 5%, the threshold which requires filing a disclosure of one's holdings in a company.

It is not clear why Musk delayed his initial filing, but the delay allowed him to accumulate more shares of Twitter at a lower price than he would otherwise have paid. That omission has already prompted a shareholder lawsuit against him.

It is likewise not clear how Musk could credibly claim that he didn't intend to change, influence or control Twitter. In the letter, Panos noted his tweets about Twitter's speech-moderation policies, which came as he was quietly accumulating his stake. Twitter has likewise documented extensive conversations between Musk and company officials in March and April as he was buying shares.

The Tesla CEO and the SEC have sparred before, and he is currently bound by a settlement requiring him to have designated officials at the electric car maker vet potentially market-moving tweets about the company before he posts them. Musk has sought to undo that settlement, but a judge recently ruled against him.

The letter's publication confirmed earlier reports that the SEC planned to investigate how Musk accumulated his Twitter stake in the run-up to his striking a deal to buy the company. Panos copied Heidi Steele, a lawyer at McDermott Will & Emery, a firm Musk hired to advise him on the Twitter takeover.

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