Elon Musk risks fresh battle with SEC over late report on Twitter stake

Elon Musk may have just picked another fight with the Securities and Exchange Commission, leading to a potential showdown over how to reveal his Twitter investment.

The CEO of Tesla He revealed on Monday that he had acquired a 9.2% stake in Twitter — making him its largest shareholder — at the Securities and Exchange Commission. appearance Investors are required to file when they own More than 5% of the company. The filing, dated March 14, revealed that Musk had purchased about 73.5 million shares for approximately $2.9 billion.

But security law experts say the filing came several days later than it should have been, because the SEC requires anyone who takes more than 5% of a normal company stake to disclose their holdings within 10 calendar days.

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

Tesla CEO Elon Musk attends the opening of the Tesla Berlin Brandenburg plant in Gruenheide, Germany, Tuesday, March 22, 2022. (Patrick Ball/Paul via AP/AP Newsroom)

“It’s baffling,” Mark Steinberg, professor of law at Southern Methodist University School of Law, told Fox Business Network. “He obviously has a very good legal board, especially in terms of filing a form with the Securities and Exchange Commission and when to file it.”

ELON MUSK buys stake in Twitter after launching its approach to ‘free speech’

Moreover, the document that Musk registered with the SEC — Form 13G — indicates that he planned to be a passive investor and that he had no intention of taking a larger role with the company. These forms require the shareholder to include a certificate stating that he did not acquire the shares in order to influence or control the company. Musk did not include this statement in its form; Wrote “does not apply”.

Twitter announcement on Tuesday that Musk will join the board of directors From managers after “conversations in recent weeks” matters can be further complicated. Musk hinted that he hopes to make “significant improvements” to the company in the coming months; His term expires in 2024.

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

“[Musk] Steinberg, a former enforcement attorney with the Securities and Exchange Commission, said that being a principal candidate is not a passive investor. And this person is not a passive investor.”

“We also know from Elon that one of his favorite things is SEC trolling. My assumption is that he might be intentionally vague.”

The Securities and Exchange Commission (SEC) likely will investigate Musk when he reached exactly the 5% share threshold that requires shareholders to report their holdings, according to Michael D’Ambra, associate professor of accounting and law at the University of Buffalo.

If the Securities and Exchange Commission determines that Musk has violated the disclosure rule, he may be subject to Financial penalty, which is historically very small, at around $100,000. A fine of this magnitude would be just a slap on the wrist for Musk, the world’s richest person with a net worth of $288 billion, according to Bloomberg Billionaire Index.

“We also know from Elon that one of his favorite things is SEC trolling,” he said. “My guess is that it might be intentionally vague.”

The Securities and Exchange Commission seal hangs on the wall at the Saudi Electricity Company headquarters (Reuters/ Jonathan Ernst/Reuters Photo)

Dambra said he believes the SEC will also be interested in Musk’s intent to invest 9.2%, given the immediate announcement of his joining the board. It is not clear what Musk’s intentions are with the purchase or the council seat.

In recent months, The founder of SpaceX A wave of criticism targeted Twitter, which accused it of stifling freedom of expression. In a tweet on Tuesday, Musk hinted that he hopes to make “significant improvements” to Twitter in the coming months after his appointment to the company’s board of directors, a term that ends in 2024.

“In the end what is interesting here, what are the consequences?” Dambra said. “Historically, you see, disclosure penalties are usually small, around $100,000. It’s very small. Does that matter to Elon versus his ability to phish? Probably not.”

This wouldn’t be Musk’s first meeting with the Securities and Exchange Commission.

In September 2018, the Securities and Exchange Commission (SEC) accused Musk of making a “misleading and misleading” investor after he abruptly tweeted in August that he was considering acquiring Tesla at $420 per share and that he had already secured financing (Tesla shares rose on initial tweet, and rose more than 10%). The deal that Musk was referring to did not come to fruition.

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Musk and Tesla eventually agreed to a settlement with the government that required fines of $20 million to be paid to the Securities and Exchange Commission. Musk also had to step down from his role as chairman of the company’s board of directors, while Tesla had to put in place controls to oversee Musk’s online communications.

Last month, Musk asked a federal judge to overturn his settlement, arguing that the Securities and Exchange Commission was abusing its social media policy to constantly investigate his statements. The Securities and Exchange Commission denied the accusation.