Elon Musk risks a new battle with the SEC due to the late report on the Twitter effort

Elon Musk may have just picked up yet another fight with the Securities and Exchange Commission, which has put up a potential showdown over how he revealed his investment in Twitter.

Tesla’s CEO revealed on Monday that he had acquired a 9.2% stake in Twitter – making him its largest shareholder – in an SEC form that investors are required to file when they own more than 5% of a business. The filing, dated March 14, revealed that Musk bought about 73.5 million shares for about $ 2.9 billion.

But security law experts say the application came more days later than it should have been because the SEC requires anyone acquiring more than 5% of a company’s joint stake to disclose their holdings within 10 calendar days.

Musk appears to have waited 21 days after March 14 to file the form. A spokesman for Musk did not immediately respond to a request for comment.

Elon Musk, Tesla’s CEO, attends the opening of the Tesla Berlin Brandenburg plant in Gruenheide, Germany, on Tuesday, March 22, 2022. (Patrick Pleul / Pool via AP / AP Newsroom)

“It’s confusing,” Marc Steinberg, a law professor at the Southern Methodist University School of Law, told FOX Business. “He obviously has very good legal advice, especially with regard to submitting a form to the SEC and when it should be submitted.”


In addition, the document that Musk registered with the SEC – Form 13G – indicates that he planned to be a passive investor and that he did not intend to take on a major role in the company. These forms require the shareholder to include a certification stating that they have not acquired the shares to influence or control the company. Musk did not include that statement on his form; he wrote “not relevant.”

Twitter’s announcement Tuesday that Musk will join the board after “talks in recent weeks” could further complicate matters. Musk indicated he hopes to make “significant improvements” to the company in the coming months; his term expires in 2024.

Shareholders hoping to hold a board position or otherwise change the company are typically required to submit a longer, more in-depth form known as 13D within 10 days of purchasing at least 5% of the shares.

“[Musk] being nominated for a director is not a passive investor, “said Steinberg, a former SEC enforcement attorney.” I think it’s pretty much a consensus in the view that a director has the ability to influence the organization’s policies and practices. , and this person is not a passive investor. ”

“We also know from Elon that one of his favorite things to do is troll the SEC. My guess is that he might be vague on purpose.”

The SEC is likely to investigate Musk about exactly when he reached the 5% stock threshold that requires shareholders to report their holdings, according to Michael Dambra, an associate professor of accounting and law at the University of Buffalo.

If the SEC finds that Musk violated the disclosure rule, he could be fined $ 10,000. A fine of that size would just be a slap on the wrist for Musk, who is the world’s richest person with a net worth of $ 288 billion, according to the Bloomberg Billionaire Index.

“We also know from Elon that one of his favorite things to do is troll the SEC,” he said. “My guess is that he may be vague on purpose.”

The seal of the US Securities and Exchange Commission hangs on the wall at SEC headquarters (Reuters / Jonathan Ernst / Reuters Photos)

Dambra said he believes the SEC will also be interested in Musk’s intention with the 9.2% investment, given the immediate announcement that he will join the board. It is unclear what Musk’s intentions are with the acquisition or board position.

The SpaceX founder has in recent months launched a barrage of criticism directed at Twitter, which he has accused of stifling freedom of expression. In a tweet Tuesday, Musk indicated he hopes to make “significant improvements” on Twitter in the coming months after he was appointed to the company’s board of directors, a period expiring in 2024.

“Ultimately, the interesting thing here is, what are the consequences?” said Dambra. “Historically, as you can see, disclosure penalties are usually typically small, around $ 100,000. They’re pretty small. Does that matter to Elon vs. his ability to troll? Probably not.”

This would not be Musk’s first meeting with the SEC.

In September 2018, the SEC accused Musk of making “false and misleading” to investors, after abruptly tweeting in August that he was considering taking Tesla private for $ 420 per tonne. more than 10%). The agreement that Musk mentioned never came to fruition.


Musk and Tesla eventually agreed on a settlement with the government, demanding that both pay $ 20 million in fines to the SEC. Musk also had to relinquish its role as chairman of the company’s board of directors, while Tesla was forced to impose controls to monitor Musk’s communications online.

Last month, Musk asked a federal judge to scrap the settlement he reached, claiming the SEC is abusing its social media policy to continually investigate his statements. The SEC has denied this accusation.

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