Stock exchange rules broken before Twitter takeover: SEC sues Elon Musk
Elon Musk started buying shares in Twitter at the beginning of 2022. He made this public too late and thus saved a lot of money. Now the SEC is suing.
Musk later took over Twitter, the service has long been called X
(Image: Sergei Elagin/Shutterstock)
Almost three years after Elon Musk began buying large quantities of Twitter shares, ultimately initiating the takeover, the US Securities and Exchange Commission has filed a lawsuit against the billionaire for allegedly violating information obligations. The allegation is that Musk informed the SEC too late in spring 2022 that he had bought more than five percent of the shares in the short message service. This gave him a financial advantage, while those who sold him the shares suffered “substantial economic harm”. According to Bloomberg, the SEC demanded 200 million US dollars from Musk in December to settle the allegations.
Paid far too little
The fact that Musk violated stock exchange regulations when preparing the Twitter takeover had already become known at the time. As the SEC now states, Musk should have disclosed on March 24, 2022, that he had acquired more than five percent of the shares in the service. As a result, he was able to acquire additional shares for 500 million US dollars in the days that followed at a price that was too low. If the remaining shareholders had known of the multi-billionaire's interest, they would have demanded higher prices, the SEC is convinced. As a result, Musk paid at least 150 million US dollars too little. When the investment became known, the share price shot up.
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According to Bloomberg, Musk had the complaint sharply rejected by a lawyer. It was an admission that the SEC could not file a “proper complaint” against Musk because he had done nothing wrong. Even if the alleged offense could be proven, it would only result in a minor penalty, and even then, the SEC is treating him unfairly. In similar cases, the SEC had accepted a “reasonable” penalty of a maximum of 100,000 US dollars. The lawsuit was filed just a few days before Donald Trump took office; Elon Musk has been one of the closest confidants of the next US president for months. He bought Twitter at the end of 2022 and later renamed it X.
Musk and the SEC have been at loggerheads for years. The authority sued him in 2018 for misleading tweets. Among other things, Musk had tweeted that he wanted to delist his electric car company Tesla from the stock exchange and that the financing for this had been secured. However, according to the SEC, this was not true. In a settlement, the Tesla boss agreed to a fine. He also had to temporarily relinquish the chairmanship of the board of directors, and has since had certain stock market-related tweets reviewed by a lawyer. But Musk mocked the SEC afterward and continued to tweet happily. Last year, the US Supreme Court refused to deal with Musk's complaint against “supervised tweeting” and thus ruled in favor of the SEC.
(mho)
