The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that the billionaire failed to disclose his acquisition of a significant stake in Twitter (now X) in early 2022. According to a Jan. 14 filing in a Washington, DC, federal court, Musk’s alleged delay in disclosing his beneficial ownership allowed him to purchase shares at lower, artificially suppressed prices, resulting in an estimated $150 million underpayment.
Missed Deadline for Disclosure
The SEC claims that Musk began acquiring Twitter stock in early 2022 and surpassed the 5% ownership threshold on March 14 of that year. Under federal securities law, Musk was required to file a report disclosing his holdings within 10 days. However, he allegedly delayed filing until April 4, 2022, missing the deadline by 11 days. On the day of Musk’s disclosure, Twitter’s stock price surged by over 27%, reflecting the market’s reaction to his involvement.
“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,” the SEC stated in its filing.
SEC Leadership Transition Looms
The lawsuit emerges amid a significant leadership change at the SEC. Chair Gary Gensler is set to step down on Jan. 20, coinciding with the inauguration of President Donald Trump. Musk, meanwhile, is slated to advise the incoming administration on government efficiency matters, further entwining the tech mogul with federal governance.
The SEC’s complaint details Musk’s alleged financial gains from the delayed disclosure. Between March 24 and April 4, 2022, Musk reportedly spent over $500 million acquiring Twitter shares. The agency claims this delay deprived Twitter investors of over $150 million in fair value for their shares during that period.
Musk’s Response and Legal Representation
Musk fired back at the SEC’s allegations in a Jan. 15 post on X, calling the agency a “totally broken organization” and criticizing its focus on his case while “many actual crimes go unpunished.” His attorney, Alex Spiro, dismissed the lawsuit as a “single-count ticky-tack complaint” and accused the SEC of engaging in a multi-year campaign of harassment against Musk.
Musk’s involvement with Twitter culminated in his $44 billion acquisition of the company on April 25, 2022. He subsequently took the platform private, rebranded it as X, and implemented sweeping changes, including the dismissal of top executives and a significant workforce reduction. Musk’s relaxation of misinformation content policies has since subjected the platform to regulatory scrutiny in regions such as Europe and Australia.
