Elon Musk is facing an investigation into the details of him taking a substantial stake in Twitter, with federal regulators saying he was late in filing a key form in the process, the Wall Street Journal reported Wednesday.
Securities and Exchange Commission (SEC) regulations require shareholders to make a public disclosure when they reach a 5% ownership stake in a company. Musk did so, but only on April 4, 10 days after his stake met the requirements for disclosure, according to WSJ.
ELON MUSK PURCHASES STAKE IN TWITTER AFTER SLAMMING ITS APPROACH TO ‘FREE SPEECH’
The SEC rule is supposed to allow existing shareholders to receive a warning that the company may be facing a buyout attempt, and the delay in Musk’s case allowed him to purchase additional stock without providing that warning, according to WSJ.
Musk’s April 4 disclosure revealed that he passed the 5% threshold on March 14, meaning he was required to disclose that purchase by March 24. He did not do so, and subsequent Twitter stock purchases after March 24 brought him to the 9.2% ownership stake he announced on April 4.
He purchased the additional 4.2% at between $38.20 and $40.31 per share, a price that was likely far lower than it would have been had he disclosed his 5% stake in a timely manner. Given that Twitter’s stock price shot up to $49.97 the day Musk ultimately disclosed his purchase, he likely saved nearly $145 million with the late disclosure, University of Pennsylvania accounting professor Daniel Taylor told WSJ.
Security law experts sounded the alarm that Musk’s move could lead to another fight with the SEC days after his disclosure in April.
“It is bewildering,” Marc Steinberg, a law professor at the Southern Methodist University School of Law, told FOX Business at the time. “He obviously has very good legal counsel, especially in regard to filing a form with the SEC and when to file it.”
The probe is not Musk’s first scrape with the SEC. The SEC sued the billionaire in 2018 for allegedly misleading Tesla shareholders with a now-infamous tweet declaring he planned to take Tesla private at $420 per share.
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Musk would ultimately make a settlement in the case, and he is now required to vet every tweet he publishes regarding Tesla with a lawyer.
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FOX Business’ Megan Henney contributed to this report.