The SEC is investigating Elon Musk for the late disclosure of his stake in Twitter which allowed him to accumulate a large amount of shares at a lower price than he might otherwise have paid, the Wall Street Journal reported on Wednesday.
Musk submitted a Schedule 13G filing filing detailing his purchase of more than 9%, or 73 million shares, of the company on April 4, which was at least 10 days later than it should have been filed. The late filing allowed Musk to save a considerable amount — more than $143 million, according to the Wall Street Journal, and $165 million by Protocol's calculations. Musk paid $2.6 billion for his shares, which are now worth around $3.32 billion, as Twitter's closed at $45.60 per share on Wednesday.
Musk also initially filed the wrong form, first disclosing his stake in a 13G, which is for passive investors, rather than a Schedule 13D. Twitter revealed Musk's activist intentions when it disclosed that it had had conversations with Musk about joining its board.
Along with the SEC's investigation over this late disclosure, the FTC is separately investigating whether Musk violated a law requiring investors to report large transactions to antitrust-enforcement agencies, according to the Wall Street Journal and the Information. Investors usually need to wait 30 days after reporting their transactions before buying more shares.
Twitter shareholder Marc Bain Rasella is also suing Musk for his tardiness. In the lawsuit filed in mid-April in a district court in New York, Rasella accused Musk of securities fraud for lowering the prices of Twitter's stock artificially, claiming that "Investors who sold shares in Twitter stock between March 24, 2022 ... missed the resulting share price increase as the market reacted to Musk's purchases and were damaged thereby."
The SEC historically has rarely punished investors who fail to make disclosures on time. But under the leadership of Gary Gensler, enforcement of SEC rules has been on the rise.
Though the SEC is taking aim at Musk's Twitter share purchase, regulators are apparently helpless in the face of his plan to buy the company outright. On May 2, Federal Communications Commission commissioner Nathan Simington shut down talk of the agency stepping in to block Elon Musk’s acquisition of Twitter, saying the the FCC doesn’t have the authority to block his $44 billion takeover of the social media company.
The SEC probe, according to the Wall Street Journal, is also unlikely to derail the takeover bid.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE