The SEC Sent a Letter to Musk About His Twitter Shares in April

The Securities and Exchange Commission on Friday revealed that it began probing Elon Musk’s Twitter stock of purchases in early April and was properly disclosing his stake and his intentions for the social media company.

In a regulatory filing, the agency said it had approached Musk on April 4. At the time, Mr. Musk, who is the richest man in the world, just became Twitter’s largest shareholder with a 9.2 percent stake in the company. Mr. Musk also filed a securities document stating that he planned to invest in the passive and that he did not intend to pursue control of the company.

Ten days later, Mr. Musk offered $ 54.20 a share to buy Twitter outright. Twitter later agreed to sell itself to Mr. Musk for roughly $ 44 billion; The transaction is expected to close in the next few months.

In a letter to Mr. Musk dated April 4, the SEC questioned whether he had disclosed his stake at the right time. The law requires shareholders who buy more than 5 percent of a company’s shares to disclose their ownership within 10 days of reaching that threshold. In regulatory filings, Mr. Musk has said he crossed that threshold on March 14, but did not make his purchases public until April 4.

In its letter, the SEC also questioned whether Mr. Musk was truly a “passive” investor, given that he had already criticized Twitter’s content moderation policies and tweeted recommendations about how the social media company should change.

Filing as a “passive investor” while secretly taking over a company is “fraudulent,” said some legal experts. Such cases are rarely prosecuted and are difficult to prove, they have added.

The SEC declined to comment. Mr. Musk did not respond to a request for comment. An attorney for Mr. Musk declined to comment.

The Federal Trade Commission is also looking into whether Mr. Musk violated disclosure requirements by failing to notify the agency of its sizable stake in Twitter. Investors generally must notify antitrust regulators to give large purchases to government officials for 30 days to review the transaction for competition violations.

Mr. Musk, who is also the chief executive of the electric car company Tesla and the rocket maker SpaceX, has tangled with the SEC’s investigation into a regulator in 2018 when he announced on Twitter that he planned to take Tesla private and that he had secured financing for the deal.

The SEC charged Musk with securities fraud because it said the transaction he was referring to was uncertain and funding had not been locked down. Mr. Musk and Tesla settled for $ 40 million. Under the terms of his agreement with the regulator, Mr. Musk must run his tweets by a Tesla lawyer if they contain material statements about the carmaker. Last month, Mr. Musk tried to end the tweet’s approval in court, but a judge denied his request.

A shareholder lawsuit against Mr. His tweet claiming Musk is planning to take Tesla private is ongoing. Mr. Musk also faces a lawsuit from Twitter shareholders over his delayed disclosure about his purchase of the social media company’s stock.

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