Key takeaways:
- According to the Wall Street Journal, US regulators opened an investigation into Elon Musk’s late disclosure of his substantial stake in Twitter (NYSE: TWTR) last month because the delay allowed the Tesla (NASDAQ: TSLA) CEO to purchase additional shares of the social media company without notifying other shareholders.
- The Securities and Exchange Commission (SEC) is looking into Musk’s late filing of a public form that investors must submit when obtaining an interest in a company worth more than 5%.
- Musk revealed his ownership on April 4, at least 10 days after his purchase cleared the submission threshold, and did not elaborate on why he did not register his shareholding sooner.
According to the report published by the Wall Street Journal, the Securities and Exchange Commission (SEC) is investigating Musk’s recent $44 billion purchase of Twitter. The SEC is particularly focused on a public forum that investors must complete before purchasing more than 5% of a company. The public form serves as a warning to current shareholders and firms that a powerful investor may be interested in acquiring control of the company.
According to the Wall Street Journal, Tesla’s CEO and future owner of Twitter, Elon Musk, is in trouble with the SEC once again, with the federal government looking into Musk’s investment in Twitter earlier this year.
Investors who buy more than 5% of a publicly-traded firm must file a report with the Securities and Exchange Commission (SEC) within 10 days of the purchase, according to the Securities Exchange Act of 1934. Musk purchased enough Twitter shares on March 14 to surpass the 5% mark, making the deadline for disclosure March 24.
As shown in a regulatory filing, Mr. Musk bought $513 million worth of stock between $38.20 and $40.31 per share after March 24. With 9.2 percent of Twitter’s shares, he became the company’s largest individual shareholder.
Furthermore, the Federal Trade Commission (FTC) is probing Musk’s purchase, and FTC authorities are presently reviewing his purchase.
Musk’s presentation deck, which includes financial projections for Twitter under his management, was recently leaked online, disclosing much information regarding Musk’s financial expectations for Twitter. By 2028, the SpaceX CEO hopes to quadruple Twitter’s yearly revenue to $26.4 billion. Musk, for example, intends to increase Twitter’s entire user base from 217 million to 600 million by 2025. There’s also a top-secret project called “X” that’s anticipated to bring in at least 104 million paying Twitter customers.
Elon Musk has been the center of attention on the network since the disclosure of the billionaire’s takeover of the social network company. So whatever he tweets are now more than ever labeled a “statement,” scrutinized, studied, and condemned.
He has recently come under fire for ensuring that he will hand over his account to Donald Trump, as well as everything else that the social media platform is “supposed” to be under his control.
Since not every investigation leads to formal action, the SEC could end its investigation without filing civil claims. According to Jill E. Fisch, a securities and corporate law professor at the University of Pennsylvania Law School, an SEC lawsuit against Mr. Musk would be unlikely to derail the Twitter deal because the company’s board of directors has affirmed it and the SEC typically lacks the power to veto mergers or take-private transactions.
Musk previously rejected lying about taking Tesla private in 2018 and stated that he felt pushed to settle the SEC inquiry. Last month, a federal judge refused his request to cancel the arrangement and end the process of having his tweets scrutinized by lawyers.
Other traders paid a price for Musk’s procrastination and ensuing profit. Former Twitter stockholders who sold their shares between the date Musk was required to reveal his interest and the date Musk actually did file a proposed class action against the billionaire in April.
If the SEC decides to take proceedings against Musk, it’s unclear what ramifications he’ll face. Whatever it is, he and his $224 billion net worth are almost untouchable. Even so, Musk has not yet exhibited much regard for the SEC in the past, nor has he expressed regret for his behavior.
