On Tuesday, the U.S. Securities and Exchange Commission initiated a lawsuit against Elon Musk, accusing him of failing to disclose his substantial stake in Twitter, now rebranded as X.
What Happened: The lawsuit outlines that before Musk completed his $44 million acquisition of Twitter in October 2022, he had already started amassing a significant number of shares.
By March 2022, Musk had acquired over 5% of Twitter’s common stock, a threshold that required disclosure to the SEC within 10 days.
This alleged non-disclosure allowed Musk to acquire shares at “artificially low prices,” according to the SEC.
The complaint, lodged in a federal court in Washington, D.C., accuses Musk and his wealth manager of withholding this crucial information to avoid a potential surge in Twitter’s stock price.
See Also: Elon Musk’s X, Hewlett Packard Strike $1 Billion AI Server Deal: Report
This alleged omission enabled Musk to underpay Twitter investors by more than $150 million for his stock purchases during this period.
According to the lawsuit, Musk increased his stake to 7% by purchasing nearly 3.5 million shares on March 25, 2022.
He later joined Twitter’s board and formally disclosed his stake in early April 2022, by which time he owned over 9% of the company, causing Twitter’s stock price to rise by more than 27%.
Why It Matters: Last month, Musk faced a deadline to settle with the SEC over his Twitter buyout, with his lawyer alleging “years of harassment” by the agency. The inquiry focused on Musk’s sale of Tesla Inc. (NASDAQ:TSLA) shares and his growing investment in Twitter before announcing a leveraged buyout of the social media platform in 2022.
In October 2024, the SEC rejected Musk’s offer to pay $2,923 for missing a deposition related to his 2022 Twitter purchase, seeking sanctions against him instead.
Musk and Vivek Ramaswamy, co-leading the “Department of Government Efficiency” in Donald Trump's administration, have previously criticized the SEC, labeling it as a “weaponized institution.” Their statement came following the Fifth Circuit Court decision that the SEC exceeded its authority by approving Nasdaq’s diversity quota policy.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
