Elon Musk sued for not disclosing Twitter ownership on time: Story in 5 points

The US Securities and Exchange Commission has filed a lawsuit against Elon Musk, accusing him of not adequately disclosing his ownership of X, formerly known as Twitter. Here is the full story in 5 points.

In Short

• Elon Musk sued by SEC for late Twitter stake disclosure
• He underpaid $150 million for shares due to non-disclosure
• Musk's lawyer calls SEC lawsuit harassment

Elon Musk is facing a lawsuit from the US Securities and Exchange Commission (SEC) for allegedly failing to disclose his stake in Twitter within the required timeframe before purchasing the social media platform. According to the SEC, Musk did not report surpassing a 5 percent ownership of Twitter’s stock in March 2022 within the mandated 10-day period.

The SEC stated that because Musk failed to timely disclose his beneficial ownership, "he was able to make these purchases from the unsuspecting public at artificially low prices, which did not yet reflect the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose.” However, Musk's lawyer has a different story to tell. Here is the full story in 5 points.

Elon Musk sued for late disclosure of Twitter ownership: Story in 5 points

- The billionaire Elon Musk took over Twitter in October 2022. But before he could fully acquire the social media platform, he started accumulating Twitter shares in early 2022. Doing so, Musk had exceeded 5 per cent ownership by March of that year. At this point, he was required by law to disclose his ownership, but he failed to do so.

- As he did not disclose his stakes, Musk was able to underpay “by at least $150 million” for shares he bought. Musk’s failure to disclose his beneficial ownership in a timely manner allowed him to purchase shares from the public at artificially low prices. These prices did not account for the material information about Musk’s ownership of more than five percent of Twitter’s common stock or his investment intentions, which had not yet been revealed, the securities regulator said. Musk eventually purchased Twitter for $44 billion in October 2022, and renamed it X.

- Musk delayed disclosing his acquisition until April 4, 11 days past the required reporting deadline. In a complaint filed in federal court in Washington, DC, the SEC accused Musk of violating federal securities laws by failing to disclose his initial purchase of 5 per cent of Twitter's common shares within the mandated timeframe.

- Alex Spiro, a lawyer for Musk, in an email called the SEC lawsuit the culmination of the regulator's "multi-year campaign of harassment" against his client. "Today's action is an admission by the SEC that they cannot bring an actual case," he said. "Mr. Musk has done nothing wrong and everyone sees this sham for what it is." He added that the lawsuit addresses a mere "alleged administrative failure to file a single form--an offense that, even if proven, carries a nominal penalty."

- The SEC has been investigating the Tesla and SpaceX CEO regarding his acquisition of the social media platform. In December, Musk revealed on social media that the agency had requested he pay an unspecified fine to resolve charges related to his purchase of Twitter shares, as noted in a letter from his attorney, Spiro. Additionally, last year, Musk faced issues with the commission for not appearing to testify during the investigation.