The Securities and Exchange Commission said Musk failed to disclose his stake, causing him to underpay $150 million for his shares.
Elon Musk has been sued by U.S. securities regulators for allegedly failing to promptly disclose his stake in Twitter before buying the social media platform.
The U.S. Securities and Exchange Commission (SEC) said on Tuesday that Musk failed to disclose within the required 10 days that he acquired more than 5% of Twitter stock in March 2022.
The SEC said in documents filed in the U.S. District Court for the District of Columbia that the Tesla and SpaceX CEO failed to notify regulators, allowing him to continue buying shares at “artificially low prices.”
The SEC said Musk’s conduct ultimately resulted in him “underpaying at least $150 million for shares purchased after beneficial ownership reports were due.”
The SEC said Musk finally notified regulators on April 4, 2022, 11 days after the due date for information disclosure, that he had acquired more than 9% of Twitter’s stock.
According to regulators, Twitter’s stock price rose 27% that day from the previous day’s closing price.
“Because Musk failed to promptly disclose his beneficial ownership, he was able to purchase these shares from an unsuspecting public at artificially low prices that did not yet reflect the undisclosed material information that Musk beneficially owned more than 5% of Twitter common stock. , and investment purposes,” the China Securities Regulatory Commission said.
During this period, Musk underpaid Twitter investors by more than $150 million for purchases of Twitter common stock. Investors who sold Twitter common stock at artificially low prices during this period suffered substantial financial losses as a result. “
U.S. securities regulations require investors who purchase more than 5% of a company’s shares to disclose their shareholding ratio so that shareholders can make informed investment decisions.
The SEC has sued Musk twice before, including in a 2018 Twitter post in which Musk claimed he had secured funding to potentially take electric car company Tesla private.
Musk settled the lawsuit by paying a $20 million civil penalty, agreeing to subject some of his social media activity to legal scrutiny and relinquishing his role as Tesla chairman.
Musk completed his $44 billion acquisition of Twitter in October 2022, after signing an acquisition agreement but then trying to withdraw.
The SEC’s latest enforcement action was announced with little fanfare, just days after Chairman Gary Gensler will resign on January 20, the day of the inauguration of U.S. President-elect Donald Trump.
It’s unclear whether the lawsuit against Musk, one of Trump’s most influential allies, will continue under Trump, who has appointed former Securities and Exchange Commission commissioner Paul Atkins to serve as chief executive. Sler’s successor.