Washington, DC [US], January 15 : The US Securities and Exchange Commission filed lawsuit against Tesla CEO Elon Musk on Tuesday for allegedly not properly disclosing his ownership of X, then known as Twitter, as required by federal law, which enabled him to purchase shares of the platform at "artificially low prices," CNN reported.
Before closing his USD 44 billion deal to purchase Twitter in October 2022, Musk started to acquire a "significant number" of Twitter shares. By mid-March 2022, he owned over 5 per cent of the company's common stock and was required to disclose that to the SEC within 10 calendar days. The SEC filing alleged that Musk did not reveal that information until April 4, 2022.
In the lawsuit, the SEC alleged, "Had Musk and his wealth manager disclosed his ownership as required, the stock price would likely have increased significantly." In a statement to CNN, Elon Musk's lawyer Alex Spiro said that "Musk has done nothing wrong" and the case was "an admission by the SEC that the they (sic) cannot bring an actual case."
Spiro said that "the SEC's multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tak complaint against Mr. Musk under Section 13(d) for an alleged administrative failure to file a single form an offense that, even if proven, carries a nominal penalty."
According to the complaint filed in DC federal court, in keeping these purchases at low prices, Musk "underpaid" to investors of Twitter by over USD 150 million for his "purchases of Twitter common stock during this period." The lawsuit alleged that Musk had increased his stake in the company to over 7 per cent by the close of March 24, 2022.
The next day, Musk bought almost 3.5 million shares. Over the next few days, he expressed interest to purchase Twitter with members of the company's board of directors. According to the lawsuit, Musk became part of Twitter's board and formally disclosed his stake in the company in early 2022.
By the time, he revealed information about his stake, he owned over 9 per cent of the company and "Twitter's stock price increased more than 27 per cent," according to the lawsuit.
The suit said, "Musk paid significantly less for the shares of Twitter common stock he purchased between March 25, 2022 and April 1, 2022 than if he had timely disclosed," adding that he spent over USD 500 million for acquiring shares during that time period, according to CNN report.
The lawsuit is one of the last decisions taken under SEC Chair Gary Gensler, who is stepping down this month. For years, Musk has clashed with GenslCEO over his acquisition of X. In December, Musk on social media revealed that the agency had asked him to pay a fine of an undisclosed amount to settle charges over his purchases of Twitter shares, according to a letter from his lawyer Alex Spiro. He landed into trouble with the commission last year after he did not appear for testimony in the probe.
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