Elon Musk may have just chosen another battle with the Securities and Exchange Commission, setting up a potential showdown over how he disclosed his investment in Twitter.
Tesla’s CEO on Monday revealed that he has acquired a 9.2% stake in Twitter – making it the largest shareholder – in the SEC form that investors must file if they own more than 5% of the company. A March 14 filing showed Musk bought about 73.5 million shares for about $ 2.9 billion.
But security law experts say the application was received a few days later than it should have been because the SEC requires anyone who acquires more than 5% of the company’s total stake to disclose their stake within 10 calendar days.
Musk seems to have waited 21 days after March 14 to submit the form. Spokesman Mask did not immediately respond to a request for comment.
“It’s surprising,” Mark Steinberg, a law professor at Southern Methodist University, told FOX Business. “He obviously has very good legal advice, especially with regard to filing a form with the SEC and when to file it.”
Ilan Musk acquires stake in TWITTER after encroaching on his approach to “freedom of speech”
In addition, a document that Musk registered with the SEC – Form 13G – shows that he planned to be a passive investor and that he was not going to take on a bigger role in the company. These forms require the shareholder to include a certificate stating that they did not acquire the shares to influence or control the company. Musk did not include this statement in his form; he wrote “not applicable”.
Twitter’s announcement Tuesday that Musk will join the board after “talks in recent weeks” could further complicate the situation. Musk hinted that he hopes to make “significant improvements” to the company in the coming months; his term expires in 2024.
Shareholders hoping to take a board position or otherwise change company should typically file a longer, deeper form, known as 13D, within 10 days of buying at least 5% of the shares.
“[Musk] being a candidate for director is not a passive investor, “Steinberg, a former SEC lawyer, said. is not a passive investor ”.
“We also know from Ilona that one of his favorite pastimes is trolling the SEC. I guess he’s deliberately vague.”
According to Michael Dumbray, an associate professor of accounting and law at the University of Buffalo, the SEC will investigate Mask if it is he who has reached the 5% stake threshold, which requires shareholders to report their holdings.
If the SEC finds that Musk has violated the disclosure rule, he could be fined, which is historically quite small, about $ 100,000. A fine of this magnitude would be just a blow to the wrist for Mask, who is the richest man in the world with a net worth of $ 288 billion, according to the Bloomberg Billions Index.
“We also know from Ilona that one of his favorite things is trolling the SEC,” he said. “I guess it could be vague on purpose.”
Dambra said he thinks the SEC will also be interested in Mask’s intentions with an investment of 9.2%, given the immediate announcement that he will join the board. It is unclear what intentions Musk has to acquire or a seat on the board.
In recent months, the founder of SpaceX has come out with a barrage of criticism of Twitter, which he has accused of suppressing free speech. On Twitter on Tuesday, Musk hinted that he hoped for “significant improvements” on Twitter in the coming months after he was appointed to the company’s board of directors, a term ending in 2024.
“After all, what’s interesting is what the consequences are?” Said Dumbra. “Historically, as you can see, the penalties for disclosure are usually small, about $ 100,000. They’re pretty small. Does that matter to Ilona against his ability to troll? Maybe not.”
This would not be Mask’s first skirmish with the SEC.
In September 2018, the SEC accused Mask of “lying and misleading” investors after he sharply tweeted in August that he was considering allocating Tesla privately for $ 420 a share and had already secured funding (Tesla shares rose after the initial tweet , growing by more than 10%). The deal, to which Musk referred, was never carried out.
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Musk and Tesla eventually agreed to an agreement with the government that required both to pay a $ 20 million fine to the SEC. Musk also had to relinquish his role as chairman of the company’s board, while Tesla was forced to establish controls to oversee Mask’s online communication.
Last month, Musk asked a federal judge to rescind the agreement he reached, claiming the SEC was abusing its policies on social media to constantly investigate his allegations. The SEC has denied the allegations.