The U.S. Securities and Exchange Commission says Musk’s failure to disclose his stake allowed him to pay less than $150 million for shares.
Elon Musk is being sued by the US securities regulator for allegedly failing to disclose his involvement in Twitter in time before purchasing the social media platform.
The US Securities and Exchange Commission (SEC) said on Tuesday that Musk failed to disclose within the required 10-day period that he acquired more than 5 percent of Twitter shares in March 2022.
The Tesla and SpaceX CEO’s failure to notify regulators allowed him to continue buying shares at “artificially low prices,” the SEC said in a filing in the U.S. District Court in the District of Columbia.
Musk’s actions ultimately allowed him to “pay less than at least $150 million for the shares he purchased after his beneficial ownership reporting expired,” the SEC said.
Musk finally informed regulators that he had acquired more than 9 percent of Twitter shares on April 4, 2022, 11 days after the planned disclosure date, the SEC said.
Twitter’s share price that day rose 27 percent from the previous day’s close, according to the regulator.
“Because Musk did not timely disclose his beneficial ownership, he was able to make these purchases to the unsuspecting public at artificially low prices, which did not yet reflect material undisclosed information about Musk’s beneficial ownership of more than five percent of the common stock of Twitter and investment purpose,” the securities regulator said.
“In total, Musk underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period. “Investors who sold Twitter common stock during this period did so at artificially low prices and therefore suffered substantial economic harm.”
U.S. securities regulations require investors who buy more than 5 percent of a company’s shares to disclose their holdings so shareholders can make informed investment decisions.
The SEC has sued Musk twice before, including a 2018 Twitter post in which he claimed to have obtained financing to possibly take electric car company Tesla private.
Musk settled that lawsuit by paying a $20 million civil penalty, agreeing to make some of his social media activity subject to legal review, and resigning from his role as president of Tesla.
Musk completed the purchase of Twitter in October 2022 for $44 billion, after signing an acquisition agreement from which he later attempted to withdraw.
The SEC’s latest enforcement action, which was announced with little fanfare, comes days before Chairman Gary Gensler leaves office on January 20, the day of US President-elect Donald Trump’s inauguration.
It is unclear whether the lawsuit against Musk, one of Trump’s most influential allies, will continue under the Trump administration, who named Paul Atkins, a former SEC commissioner, as Gensler’s successor.
