US markets watchdog sues Musk over Twitter stake disclosure

US Markets Watchdog Sues Elon Musk Over Twitter Stake Disclosure

The Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that he failed to disclose his significant stake in Twitter on time, which enabled him to purchase shares at “artificially low prices.”

According to SEC regulations, investors crossing a 5% ownership threshold must disclose their stake within 10 days. However, Musk reportedly delayed this disclosure by 21 days, saving himself approximately $150 million (£123m) in share purchases, the complaint states.

Musk, the billionaire CEO of Tesla and owner of X (formerly Twitter), responded on social media, calling the SEC a “totally broken organization” and accusing it of “wasting time” when “actual crimes go unpunished.”

Allegations Against Elon Musk

The SEC’s complaint alleges that Musk’s actions caused economic harm to investors by manipulating the market.

• April 4, 2022: Musk disclosed his stake in Twitter, causing the platform’s share price to jump by 27%.
• By delaying the announcement, Musk allegedly saved millions in his share purchases before the price spike.

In the lawsuit filed in a Washington DC federal court, the SEC is seeking:

1. Musk’s “unjust profits” to be returned.
2. A fine to penalize the violation.

SEC Chair Gary Gensler described Musk’s actions as a breach of trust with the market and investors.

Elon Musk’s Response

In response to the lawsuit, Musk and his legal team dismissed the SEC’s allegations as a “sham” and an act of harassment.

Musk’s lawyer, Alex Spiro, stated that the regulator’s actions were politically motivated, particularly given Musk’s ties to President-elect Donald Trump, with whom Gensler has clashed in the past.

On social media, Musk doubled down on his criticism of the SEC, saying it was wasting resources on his case while ignoring more significant crimes.

SEC vs Musk: A Long History

This is not Musk’s first clash with the SEC.

• In 2018, the SEC accused Musk of misleading investors by tweeting he had “funding secured” to take Tesla private.
• Musk settled that case, stepping down as chairman of Tesla’s board and agreeing to oversight of his public communications, a measure often referred to as a “Twitter sitter.”

Impact on Musk and X

Musk’s acquisition of Twitter in October 2022 for $44 billion marked the culmination of his stake-building strategy. Since then, he has rebranded the platform as X and implemented significant changes.

Despite Musk’s continued legal battles, his influence over the platform and other ventures like Tesla and SpaceX remains largely unaffected.

Political Implications

The lawsuit comes as SEC Chair Gary Gensler prepares to leave his position ahead of Donald Trump’s inauguration on 20 January 2025.

• Trump’s Promise: The president-elect has openly criticized Gensler and plans to remove him on his first day in office.
• The timing of this lawsuit raises questions about its potential political motivations, given Musk’s close alliance with Trump.

External Link: BBC

Internal Link: Kenkou Land