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US securities regulators have sued Elon Musk for allegedly failing to make timely disclosures on his purchases of Twitter shares in 2022, helping him achieve a discount of at least $150mn on his additional stock acquisitions.
The Securities and Exchange Commission accused Musk, one of president-elect Donald Trump’s closest allies, of not disclosing a holding of more than 5 per cent of Twitter on time, in contravention of US securities law.
Regulators claimed in a civil lawsuit filed in Washington federal court on Tuesday that Musk bought up more than 5 per cent of Twitter stock by March 14 2022, but he publicly disclosed his ownership only on April 4 — 11 days after it became reportable. On the day his stake was reported, Twitter shares rose more than 27 per cent, the SEC said.
“Musk was able to continue purchasing shares at artificially low prices, allowing him to underpay by at least $150 million for shares he purchased after his beneficial ownership report was due,” the regulator alleged in the complaint.
The alleged breach of securities law came as Musk was arranging his purchase of Twitter, a deal which closed for $44bn in October 2022. He has since renamed the social media site X.
The lawsuit marks the latest broadside by the SEC against the world’s richest man. The agency accused Musk in 2018 of securities fraud in a separate case related to online posts about his electric-carmaker Tesla. Musk later settled with the SEC but has butted heads with the regulator over the terms of that agreement.
Tuesday’s complaint is one of the last enforcement actions led by SEC chair Gary Gensler before he steps down on January 20, the day of Trump’s inauguration as president.
Alex Spiro, an attorney for Musk, said: “As the SEC retreats and leaves office — the SEC’s multiyear campaign of harassment against Mr. Musk culminated in the filing of a single-count, ticky-tack complaint . . . an offence that, even if proven, carries a nominal penalty.”
Spiro added: “Today’s action is an admission by the SEC that . . . they cannot bring an actual case — because Mr Musk has done nothing wrong and everyone sees this sham for what it is.”
The regulator began its probe into the stock purchases in April 2022, according to regulatory filings. That month, the SEC sent a letter to Musk asking him why he did not make the appropriate filing by a late-March deadline and why he had initially indicated that he was going to be a passive investor.
