A US financial regulator has sued Elon Musk for allegedly failing to disclose his ownership of Twitter stock and later acquiring shares in the company at “artificially low prices”, stiffing other shareholders.
The Securities and Exchange Commission (SEC) filed suit against Musk late on Tuesday in federal court in Washington DC for alleged securities violations. According to the suit, Musk did not disclose that he had acquired a 5% stake in the company in a timely manner, which allowed him “to underpay by at least $150m for shares he purchased after his financial beneficial ownership report was due”.
Musk bought Twitter in 2022 for $44bn and later renamed it X. Before the purchase, Musk bought the 5% stake in the company, which typically requires a public disclosure. The SEC alleges that it wasn’t until 11 days after the report was due that Musk disclosed his ownership in Twitter.
Alex Spiro, a lawyer for Musk, said in an emailed statement that the SEC’s case amounted to “an admission” that the agency had no case. Musk, Spiro said, “has done nothing wrong and everyone sees this sham for what it is”.
It is not the first time the SEC has looked into Musk’s purchase of Twitter. The agency launched an investigation into Musk and his brother, Kimbal Musk, in 2021 over alleged securities fraud and violations of insider trading rules after they sold tens of thousands of shares in Tesla. Musk is the CEO of Tesla and his brother sits on the board of directors.
Spiro said the SEC lawsuit was the result of an alleged administrative failure to “file a single form”. He added that “the SEC’s multi-year campaign of harassment against Mr Musk culminated in the filing of a single-count ticky-tack complaint against Mr Musk”.
Over the past several months, Musk has forged a tight relationship with Donald Trump. Musk donated millions to his re-election effort and campaigned with him. Trump has since named Musk head of an advisory group, which Trump claims he will create, called the “department of government efficiency”, meant to oversee government regulations and spending.
In its lawsuit, the SEC said that before Musk’s delayed disclosure of his ownership in Twitter, he allegedly spent more than $500m purchasing additional shares in the company and was able to buy the stock from the “unsuspecting public at artificially low prices”.
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When Musk eventually disclosed his ownership to the SEC 11 days later, he said he had acquired more than 9% of Twitter’s stock. The SEC wrote in its lawsuit: “That day, Twitter’s stock price increased more than 27% over its previous day’s closing price.”
