The US Securities and Exchange Commission (SEC) has sued tech billionaire Elon Musk, alleging that he failed to disclose a significant stake in Twitter in a timely manner in 2022. Musk is accused of not revealing that his shareholding had exceeded the 5% threshold in a timely manner, allowing him to purchase additional shares at a lower price. The SEC is seeking the return of $150 million in allegedly ill-gotten gains, as well as a fine.
Musk began buying Twitter shares in early 2022, and according to US rules, a stake of more than 5% must be publicly disclosed within 10 days. Musk’s stake reached the 5% threshold on March 14, 2022, but the disclosure was only made on April 4, 11 days late. In the intervening period, his stake increased to 9%. After the disclosure, the stock price surged by 27%.
The SEC accuses Musk of profiting from the delayed disclosure, thereby disadvantaging shareholders who sold their shares to him at a lower price.
The lawsuit comes at a sensitive time. Donald Trump is set to be inaugurated as the new US President on January 20, and with him, the SEC is expected to have a new leadership. The current chairman, Gary Gensler, has announced his resignation on the day of Trump’s inauguration. As a close Trump ally, Musk could potentially benefit from this change. It is possible that the lawsuit will be dropped.
Musk’s lawyer, Alex Spiro, rejects the accusations, describing the SEC’s actions as a “years-long campaign” against the entrepreneur. Musk himself sees himself as a victim of the regulatory body, which has targeted him on multiple occasions in the past.