16 JAN 2025 / REGULATORY

Is Musk Playing Hide and Seek with the SEC?

The SEC has officially sued Elon Musk, accusing him of securities fraud in connection with his $44 billion acquisition of Twitter, now rebranded as X. The lawsuit centers on Musk’s failure to disclose his more than 5% stake in Twitter by the March 24, 2022 deadline. The delayed filing revealed a 9.2% stake, boosting Twitter’s stock price by 27%. The SEC alleges this allowed Musk to underpay by at least $150 million for shares purchased after the disclosure deadline.

Here’s the backstory: Musk was scheduled to testify on September 10, 2024, but instead chose to attend a SpaceX rocket launch in Cape Canaveral. The SEC, which had already spent thousands of dollars to fly three attorneys to Los Angeles for the testimony, received Musk's last-minute notice just three hours before the scheduled appearance. The SEC has described Musk’s actions as “gamesmanship,” emphasizing that he was well aware of the rocket launch plans.

The SEC is now considering sanctions against Musk, seeking an order for him to show cause as to why he should not be held in civil contempt for missing the testimony. Although Musk's legal team argued that the testimony was "rescheduled for the critical rocket launch" and called the sanctions “drastic and inappropriate,” the SEC is proceeding with its case. They’ve set a new testimony date for October 3, 2024, with all eyes on whether Musk will appear this time.

Additionally, the SEC is seeking a jury trial and demanding that Musk return profits from the stock purchases made after the report was due. Musk’s lawyer dismissed the lawsuit as a "sham," insisting that Musk had done nothing wrong. The SEC’s ongoing scrutiny of his business dealings continues to make headlines, raising questions about the broader implications of his actions.

This isn’t Musk's first run-in with the SEC. He was previously fined $20 million in 2018 for misleading tweets about taking Tesla private. His latest actions have drawn more scrutiny, especially regarding whether he violated securities laws when he began accumulating Twitter stock in early 2022.

As the world’s wealthiest individual with a net worth estimated at $417 billion, Musk’s decisions often dominate headlines. The SEC’s lawsuit adds another layer of complexity to his controversial Twitter buyout, now rebranded as X. It seems controversy surrounds Twitter from all sides. Currently, the platform is blocked in ten countries, including Brazil, China, Iran, Myanmar, North Korea, Pakistan, Russia, Tanzania, Turkmenistan, and Venezuela. On top of that, investment banks remain skeptical about their future plans, adding to the uncertainty looming over Twitter’s journey ahead. Stay in the know—subscribe now and keep your inbox smarter, not cluttered!