Elon Musk may have just chosen another battle with the SEC, creating a possible showdown over how he revealed his investment in Twitter.
Tesla CEO revealed on Monday that he had acquired a 9.2% stake in Twitter – making him its largest shareholder – in an SEC form that investors are required to deposit when they own more than 5% of a company. The March 14 filing revealed that Musk bought about 73.5 million shares for about $ 2.9 billion.
However, security experts say the deposit came several days later than it should, because the SEC requires anyone who acquires more than 5% of a company’s common stock to disclose their holdings within 10 calendar days.
Musk apparently waited 21 days after March 14 to submit the form. A Musk spokesman did not immediately respond to a request for comment.
Elon Musk, CEO of Tesla, attends the inauguration of the Tesla plant in Berlin, Brandenburg, Gruenheide, Germany, on Tuesday, March 22, 2022. (Patrick Pleul / Pool via AP / AP Newsroom)
“It’s confusing,” Mark Steinberg, a law professor at Southern Methodist University Law School, told FOX Business. “He obviously has very good legal advice, especially regarding the submission of a form to the Hellenic Capital Market Commission and when to submit it.”
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In addition, Musk’s document to the SEC – from 13G – shows that he planned to be a passive investor and did not intend to take on a bigger role in the company. These forms require the shareholder to include a certification stating that he did not acquire the shares in order to influence or control the company. Musk did not include this statement in his publication. wrote “not applicable”.
Twitter’s announcement on Tuesday that Musk would join the board after “discussions in recent weeks” could further complicate matters. Musk hinted that he hoped to make “significant improvements” to the company in the coming months. His term expires in 2024.
Shareholders hoping to take a seat on the board or otherwise change company are usually required to submit a larger, more comprehensive form known as 13D within 10 days of purchasing at least a 5% stake.
“[Musk] “Being a director is not a passive investor,” said Steinberg, a former SEC law enforcement lawyer. , and this person is not a passive investor. ”
“We also know from Elon that one of his favorite things to do is troll the SEC. My guess is that it may be vague on purpose.”
The SEC is likely to investigate Musk as to when exactly the 5% share threshold required of shareholders to report their shares reached, according to Michael Dambra, an associate professor of accounting and law at the University of Buffalo.
If the Securities and Exchange Commission found that Musk had violated the disclosure rule, a fine of about $ 100,000, which is historically very small, could be imposed. A fine of this magnitude would be just a slap in the face to Musk, the world’s richest man with a net worth of $ 288 billion, according to the Bloomberg Billionaire Index.
“We also know from Elon that one of his favorite things to do is troll the SEC,” he said. “My guess is that it may be intentionally vague.”
US Securities and Exchange Commission stamp hangs on wall at SEC headquarters (Reuters / Jonathan Ernst / Reuters Photos)
Dambra said he believes the SEC will also be interested in Musk’s intention to invest 9.2%, given the immediate announcement that he will join the board. It is not clear what Musk intends to do with the purchase or the board position.
In recent months, the founder of SpaceX has launched a series of criticisms targeting Twitter, which he accused of stifling freedom of speech. In a tweet on Tuesday, Musk hinted that he hoped to make “significant improvements” to Twitter in the coming months after being appointed to the company’s board, a term that expires in 2024.
“After all, what is interesting here is, what are the consequences?” said Dabra. “Historically, as you can see, the revelation penalties are usually small, about $ 100,000. They are quite small. Does this matter to Elon over his ability to troll? Probably not.”
This would not be Musk’s first clash with the SEC.
In September 2018, the SEC accused Musk of making “false and misleading” statements to investors, after tweeting in August that it was considering taking Tesla private at $ 420 per share and had already secured funding (Tesla shares soared). soared with the original tweet, increasing more than 10%). The deal that Musk referred to never materialized.
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Musk and Tesla finally agreed on a deal with the government that required them both to pay $ 20 million in fines to the SEC. Musk also had to step down as chairman of the company, while Tesla was forced to implement controls to oversee Musk’s communication online.
Last month, Musk asked a federal judge to overturn the deal, arguing that the SEC was abusing its social media policy to constantly investigate his statements. The SEC has denied the allegations.
