US Securities Regulator Sues Elon Musk Over Late Twitter Stake Disclosure

Washington — Elon Musk, the world’s richest person, is facing a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) over his delayed disclosure of a significant stake in Twitter, the social media company he later acquired.

Key Details:

• SEC Allegations: The SEC claims that Musk violated federal securities laws by failing to disclose his initial 5% stake in Twitter on time. According to SEC rules, investors are required to disclose any ownership crossing the 5% threshold within 10 calendar days, which in Musk's case was by March 24, 2022. However, Musk did not disclose his stake until April 4, 2022—11 days later.

• Financial Impact: The SEC argues that Musk's delay allowed him to continue buying Twitter shares at artificially low prices, saving him at least $150 million. Following the disclosure, Twitter's share price rose by more than 27%, benefitting Musk at the expense of other investors.

• Legal Consequences: The SEC’s lawsuit seeks to force Musk to pay a civil fine and return the profits he gained from the delay.

Musk’s Defense:

Musk’s lawyer, Alex Spiro, strongly rejected the SEC’s claims, calling the lawsuit part of a "multi-year campaign of harassment." Spiro argued that the lawsuit is based on a minor "administrative failure" to file a form on time and that any penalty, even if the SEC’s case is proven, would be insignificant.

Background:

Musk ultimately purchased Twitter for $44 billion in October 2022 and renamed it X. This lawsuit is not the first legal challenge between Musk and the SEC. The two have clashed before, most notably in 2018 over Musk’s controversial tweet about taking Tesla private. Musk settled that case by paying a $20 million fine and agreeing to some oversight of his public communications.

In addition to the SEC lawsuit, Musk has also been sued by former Twitter shareholders for the delayed disclosure.

Political Context:

The SEC filed the lawsuit just days before the inauguration of U.S. President-elect Donald Trump. SEC Chairman Gary Gensler is stepping down on January 20, and Trump’s nominee to replace him, Paul Atkins, is expected to review many of Gensler’s actions, including this one.

Musk has repeatedly criticized the SEC’s regulatory actions, further intensifying the ongoing conflict between the two parties.