The Securities and Exchange Commission (SEC) has filed an enforcement action against Elon Musk, co-chair of the Department of Government Efficiency, for alleged violations of federal securities laws related to his 2022 acquisition of the social media platform X, formerly known as Twitter.
The SEC alleges that Musk failed to timely file a beneficial ownership report with the Commission after acquiring more than 5% of Twitter’s outstanding shares. This failure, according to the SEC, allowed Musk to purchase over $500 million worth of Twitter stock at artificially low prices before publicly disclosing his ownership stake.
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“As alleged, because Musk failed to timely file a beneficial ownership report with the SEC, he was able to make these purchases of Twitter common stock at artificially low prices from the unsuspecting public, who had not yet priced in the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose,” the SEC stated in a litigation release.
The SEC further claims that Musk underpaid “by at least $150 million” for his Twitter stock purchases due to this delayed disclosure. Investors who sold Twitter stock during this period also suffered “substantial economic harm,” according to the SEC, as they were unaware of Musk’s significant ownership stake.
This enforcement action comes at a time of transition for the SEC, with Chief Accountant Paul Munter announcing his retirement just days before the incoming administration takes office. It remains unclear whether the SEC will continue to pursue the case against Musk under the new administration.
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This is not the first time Musk has faced scrutiny from the SEC. In 2018, he settled with the agency over allegations of misleading Tesla investors with tweets about taking the company private. This latest action adds another chapter to Musk’s complex relationship with securities regulators.
The outcome of this case could have significant implications for Musk and for regulations surrounding disclosure of ownership stakes in publicly traded companies.
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