SEC Sues Elon Musk For Failure To Disclose Twitter Stake

The American financial regulator, the US Securities and Exchange Commission (SEC) has begun legal action against Elon Musk, the billionaire owner of X (formerly Twitter).

The Associated Press reported that the SEC sued Elon Musk, alleging he failed to disclose his ownership of Twitter stock in a timely manner in early 2022, before buying the social media site.

This was because Musk had first acquired a 5 percent stake in Twitter in March 2022, but he then made a late disclosure in April 2022 when he surprised observers by revealing he had increased his shareholding to 9.2 percent.

At the time Musk denied he was intending an acquisition or takeover of Twitter.

Twitter purchase

Musk then accepted an offer of a seat on Twitter’s board, but just days before joining the board, he suddenly declined.

In April 2022 Musk then made his takeover offer for Twitter and signed a deal, agreeing to purchase the firm for $54.20 per share.

Multiple lawsuits were filed against Musk in 2022, from disgruntled shareholders who alleged Musk had carried out stock market manipulation.

The SEC in May 2022 had begun looking into Musk’s disclosure of his stake in Twitter, questioning whether he had filed the appropriate paperwork.

The SEC in October 2023 then sued Musk to compel him to testify over his Twitter purchase, after he had failed to do so on 15 September 2023.

A federal court in May 2024 ordered Musk to testify in court after the Tesla and SpaceX chief executive refused to attend an interview for the probe.

In September 2024 the SEC warned that it intended to sanction Musk, after the billionaire failed to appear for testimony ordered by the court for the SEC’s probe into Musk’s $44 billion (£33bn) takeover of Twitter, now named X.

In October 2024 representatives of Musk declined to say whether he had attended an interview with the US Securities and Exchange Commission after cancelling at short notice a previous appointment mandated by a federal court.

SEC lawsuit

Now the Associated Press has reported that the SEC alleged that because Musk failed to disclose his ownership of Twitter stock in a timely manner in early 2022, before buying the social media site, he was able to underpay “by at least $150 million” for shares he bought after he should have disclosed his ownership of more than 5 percent of Twitter’s shares.

The SEC alleges that Musk had started amassing Twitter shares in early 2022, and by March of that year, he owned more than 5 percent. At this point, the complaint says, he was required by law to disclose his ownership, but he failed to do so until 4 April 2022, 11 days after the report was due.

Musk’s lawyer, Alex Spiro, told AP in a statement that the lawsuit “is an admission by the SEC that they cannot bring an actual case” since Musk has “done nothing wrong.”

He called the lawsuit a “sham.”

“As the SEC retreats and leaves office — the SEC’s multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tack complaint against Mr. Musk under Section 13(d) for an alleged administrative failure to file a single form — an offense that, even if proven, carries a nominal penalty,” Spiro added.

The SEC’s current chair, Gary Gensler, is to step down from his post on 20 January 2025. It remains to be seen whether the incoming Trump administration will continue the lawsuit.

Bad blood

The bad blood between Musk and the SEC stems from August 2018, when Musk surprised the markets, when he tweeted that he was considering taking Tesla private and he had secured funding to do so.

The SEC sought to ban Elon Musk from acting as an officer or director of a publicly traded company as a result, after the privatisation never materialised.

In the end, the US financial regulator forced Musk to step down as chairman of Tesla and pay $20m in penalties.

In addition, Tesla itself also had to pay a $20 million penalty.

Musk however was allowed to retain the Tesla CEO role and have his subsequent tweets about Telsa vetted by a company lawyer – a process that he has allegedly broken on multiple occasions.

Musk did not help his corner after he continued to insult the SEC over the years.

In October 2018 for example Musk tweeted that the US agency was the “shortseller enrichment commission.”

Then in December 2018 Musk publicly admitted that he had “no respect” for the SEC. Worse was to come in July 2020 when Musk tweeted an insult.

The message was widely read as having a vulgar meaning and comprising a major insult to the federal agency.