SEC sues Elon Musk for allegedly failing to properly disclose his Twitter ownership stake

The US Securities and Exchange Commission sued Elon Musk on Tuesday for failing to properly disclose his ownership of X, then known as Twitter, which allowed him to buy shares of the platform at "artificially low prices."

Before he closed his US$44 billion (NZ$78b) deal to buy Twitter in October 2022, Musk began to acquire a "significant number" of Twitter shares.

By March 2022, he owned more than 5 percent of the company's common stock and was required to disclose that to the SEC within 10 calendar days. The filing alleged that Musk failed to disclose that information.

Musk and his wealth manager did not disclose the purchases because Twitter's stock price could shoot up as a result, the suit alleged.

In keeping these purchases at low prices, Musk "underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period," according to the complaint, which was filed in DC federal court.

Although Musk was required to disclose his 5 percent ownership by 24 March, 2022, he purchased almost 3.5 million shares the next day, increasing his stake in the company to 7 percent, according to the lawsuit. He also expressed interest in acquiring Twitter to a member of the company's board of directors.

Musk joined Twitter's board and formally disclosed his stake in the company in early April 2022, according to the lawsuit. By the time he disclosed his stake, he owned more than 9 percent of the company and "Twitter's stock price increased more than 27%", 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," the suit said, adding that he spent more than $500m acquiring shares during that time period.

The SEC has been probing the Tesla and SpaceX chief executive over his acquisition of the social media platform. In December, Musk disclosed on the social media that the agency had demanded that he pay a fine of an undisclosed amount to settle charges over his purchases of Twitter shares, according to a letter from his attorney Alex Spiro.

Last year, Musk ran into trouble with the commission because he failed to appear for testimony in the investigation.

-CNN