Crypto
- SEC says Musk was obliged to disclose his Twitter stock ownership by March 24
- Since he didn’t do that, he was able to buy more stock between March 25 and April 1 with a major discount
- People who sold before knowing of Musk’s actions were also harmed, the SEC says
Earlier this week, the US Securities and Exchange Commission filed a lawsuit against billionaire tech mogul Elon Musk, claiming he did not disclose his ownership of Twitter stock as federal law mandates.
As a result, he was able to buy more stock, and ultimately the entire company, at “artificially low prices.”
Before agreeing to purchase the social media giant, Elon Musk was actively buying Twitter stock. By mid-March 2022, he managed to purchase more than 5% of the company’s common stock.
This meant that, per the beneficial ownership reporting requirements, under the Securities Exchange Act of 1934, he was obliged to report his ownership to the SEC within 10 calendar days, a deadline which expired on March 24, 2022.
In the next few days, between March 25, 2022, and April 1, 2022, he made more purchases, totaling more than $500 million. The SEC alleges that since the general public did not know about Musk’s activities, they could not price in the news. As a result, Musk damaged other owners for at least $150 million.
The damages also extend to people who sold their stock in late March, the SEC alleges: “Due to Musk’s failure to timely file a beneficial ownership report with the SEC, investors that sold Twitter common stock between March 25, 2022 and April 1, 2022 did so at artificially low prices, thereby suffering substantial economic harm.”
The outcome of the lawsuit is yet to be seen, but Musk’s effect on Twitter is undeniable. On March 31, mere days before disclosing his purchases, Twitter stock was priced at $39.35, shooting to $54.51 on April 5, a spike of 38.5%.
It is safe to assume that Musk will dispute the lawsuit. In mid-December, the SEC allegedly proposed a settlement, but Musk’s attorney declined, accusing the SEC of being “engaged in an improperly motivated campaign” against Musk, the individuals, and companies associated with him. A witch hunt, if you will.
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