Did Elon Musk Break Capital Market Laws Again?
Former US Securities and Exchange Commission (SEC) officials and academics said Musk may have missed an important deadline to disclose the 9% purchase of Twitter.
Musk revealed on Monday (4) the purchase of a 9.2% stake in Twitter, becoming the largest shareholder of the social network and generating a 27% soar in the company’s shares.
The purchase of Musk’s stake was March 14.
US securities law requires investors to disclose within 10 days the acquisition of 5% of a company, which in Musk’s case would expire on March 24.
Late submission of this information could lead to a civil violation fine of up to $207,183, according to Urska Velikonja, a professor at the Georgetown University Law Center.
Financially, this is irrelevant to Musk, the world’s richest man with a net worth of $302 billion, according to Forbes.
But the SEC could look into allegations of market manipulation and seek tougher sanctions in the investigation into Tesla’s stock sales, experts say.
“This is not a gray area. He bought and didn’t notify within 10 days. It’s a violation,” said Adam C. Pritchard, a law professor at the University of Michigan.
The SEC is also investigating a tweet by Musk from November 2021 in which he asks his followers whether he should sell 10% of his stake in Tesla.
The regulator reached an agreement in 2018 for Musk to get pre-approval on some of his tweets, after he said in a posting that he had secured a loan to take Tesla private. The SEC pointed to fraud against investors.
Musk also made comments about Twitter, after having bought a stake in the company, but without revealing the stake.
On March 25, Musk tweeted: “Free speech is essential for a functioning democracy. Do you believe that Twitter strictly adheres to this principle?”
The next day, Musk, a regular Twitter user, said he was “seriously thinking” about building a new social media platform.
“Musk is taking real risks,” Velikonja said. He is playing games with SEC officials, saying “‘Stop me if you can, but you can’t,” he said, adding, “I suspect the SEC will investigate whether it is possible to charge him with manipulation.”
“Arguably, social media posts about possible alternatives to Twitter could be seen, in light of previously undisclosed participation, as a form of manipulation to affect the stock price, but proving this seems difficult,” said Howard Fischer, a former CEO. SEC advisor and partner at the law firm Moses & Singer.
Twitter shares soared after Musk bought a stake valued at about $2.4 billion on March 14, but that jumped to $3.7 billion by the last trading session.
What’s more, some timely trades on Twitter options days before Musk reveals his purchase are raising eyebrows among industry analysts.
Source: CNN Brasil
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