The Securities and Exchange Commission has filed suit against Elon Musk dating back to his 2022 acquisition of Twitter, now he had accumulated in the social media platform within a required five-day window and, instead, purchased more shares.
His gain came at the expense of Twitter’s other shareholders, the Commission said. If his initial investment had been made public on time, the stock would have risen (as it did later) and Musk’s subsequent investment would have cost him more. Likewise, shareholders who sold before Musk revealed his stake received a lower price.
SEC rules give investors five days to report a stake of 5% or more in a public company, but Musk took longer, “in violation of beneficial ownership reporting requirements” under the SEC. Securities Exchange Act.
According to the SEC complaint, Musk saved at least $150 million at the expense of Twitter shareholders by failing to submit the beneficial ownership report in a timely manner.
“Congress enacted the beneficial ownership reporting requirements to, among other things, assist investors in making informed investment decisions by providing information about accumulations of certain classes of equity securities by persons who may modify or influence the control of issuing companies,” the SEC said. said.
According to the complaint, after Musk failed to “timely file” a beneficial ownership report by the required date of March 24, 2022, he purchased more than $500 million worth of Twitter common stock between March 25 and April 1, 2022.
“As has been 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 a unsuspecting public, who had not yet taken into account Musk’s undisclosed material beneficial ownership of more than five percent of Twitter’s common stock and investment objective.
According to the SEC complaint, Musk underpaid for his purchases of Twitter common stock by at least $150 million during that period. The complaint further alleges that due to Musk’s failure to timely file a beneficial ownership report with the SEC, investors who sold Twitter common stock between March 25, 2022 and April 1 2022 did so at artificially low prices, thereby suffering significant economic harm.
The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, seeks a permanent injunction, “disgorgement of ill-gotten gains” plus prejudgment interest and civil penalties.
