Elon Musk faced questions from the US Securities and Exchange Commission about how and when he disclosed his large stake in Twitter last month, before agreeing to buy the social media company.
On April 4, the same day that Musk initially revealed that he had purchased a more than 9% stake in Twitter and became the company’s largest shareholder, the SEC sent him a letter asking why he appeared to have delayed the disclosure of his participation in an apparent violation of securities law.
In its letter to Musk, which came out on Friday, the SEC asked him to “please advise why the [divulgação inicial] does not appear to have been made within the required 10 days” from the date he acquired a stake in the company greater than 5%.
Musk’s share of Twitter hit 5% on March 14, according to a document, in which case public disclosure of that share should have been made by March 24.
Musk’s delayed disclosure saved the billionaire an estimated $143 million, keeping the stock price lower than it could have been as he continued to buy stock, estimated Daniel Taylor, an accounting professor at the University of Pennsylvania.
“I think it could be laziness or the belief that the rules don’t apply,” Taylor told CNN Business earlier this month.
“But if you look at when the SEC imposes the filing delay, it’s relatively rare. From a cost-benefit perspective, it makes sense not to archive. Even if the cost for the delay is a $100,000 fine or a multi-million dollar fine, why not [atrasaria o arquivamento]?”
The SEC also asked why Musk initially filed a disclosure aimed at passive investors who don’t plan to exert their influence to make changes to a company. Musk had previously made several comments on Twitter suggesting that he felt changes needed to be made to the platform.
“Your response should address, among other things, your recent public statements on Twitter’s platform about Twitter… including statements questioning whether Twitter (the issuer) strictly adheres to ‘free speech principles,'” the SEC said in its letter .
Musk and the SEC did not immediately respond to requests for comment. Twitter declined to comment.
The letter adds another complication to an already troubled business.
Musk in recent weeks has questioned the acquisition saying he is “on hold” pending details about the number of spam accounts on the platform, despite waiving due diligence for the transaction. Twitter said it remains “committed to completing the transaction at the agreed price and terms.”
Tesla’s CEO has had a difficult history with the SEC. In 2018, Musk tweeted that he was “considering taking Tesla public for $420” and that he had “funding secured,” sparking a frenzy and sending shares in the automaker from $342 to $371.
The SEC later said the funding had not, in fact, been secured and sued Musk for misleading investors.
Musk eventually settled with the SEC for $20 million and resigned from his role as president of Tesla.
Musk has tried to fight a clause in that deal that requires him to have certain tweets about Tesla reviewed by lawyers before publishing them — and has made several derogatory comments about the agency.
But a judge last month refused to overturn the deal, saying in his ruling that none of Musk’s “arguments” are valid.
Source: CNN Brasil
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