The U.S. Securities and Exchange Commission (SEC) is investigating the revelation of Tesla CEO Elon Musk of his stake in Twitter Inc. in early April, according to a letter the agency sent him that month.
In the letter, now made public by the SEC, the regulator asks Musk why it appears he did not file the required documentation within 10 days of the acquisition, and also wonders why, when Musk revealed his involvement , used a form intended to be passive. investors while openly questioning Twitter’s policies on free speech.
Specifically, the SEC asked Musk to explain why he initially chose to file a “13G” disclosure form, which is intended for investors who plan to keep their shares passively instead of a “13D” form. which is for activist investors who intend to influence management. and company policies. He later modified the listing. Musk was offered a seat on the board shortly after its initial disclosure and has since tried to buy the company directly under a $ 44 billion deal to take it private.
Musk’s spokesmen did not immediately respond to a request for comment. An SEC spokesman declined to comment.
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Separately, Twitter said on Friday in a presentation that it did not accept the resignation of Egon Durban, an ally of Musk, from his board. Two days earlier, Twitter shareholders had blocked his re-election, but the company said it provided “unparalleled operational knowledge of the industry” and would instead reduce its board functions elsewhere.
External experts had previously said that Musk’s late submission and seemingly inadequate documentation could draw the attention of the SEC, which has clashed with Musk in the past.
But the financial consequences for the world’s richest man could be limited, as fines for such a misstep are likely to amount to a few hundred thousand dollars, according to outside experts. And others were skeptical that it could jeopardize Musk’s efforts to acquire Twitter.
“I think from this point of view of the investigation, the SEC will have a pretty strong case that has violated securities laws,” said Josh White, a finance professor at Vanderbilt University who previously worked for the SEC. as a financial economist. However, he added that “it would be disastrous if [the SEC] he said, well, this Twitter deal is pending because Musk submitted the wrong form.
“The price of Twitter shares would go down instantly … I don’t think the Commission has an interest in necessarily preventing the deal.”
The SEC letter is dated the same day Musk revealed a 9.2% stake in Twitter. The billionaire has been sued by investors alleging that he manipulated the company’s share price downwards and benefited by not disclosing his investment in time.
The CEO of Tesla Inc. has had problems with the SEC before, when the agency sued him in 2018 after he tweeted that he had “secured funding” to keep the electric car company private at $ 420 a share. Actually, a purchase was not close.
However, Reuters reports that the SEC has been reluctant to take Musk to court over perceived violations of the resulting agreement to worry that they might lose the case, but has chosen to urge him to comply. .
Tesla shares rose 5.75% in midday trading, while Twitter shares rose 2.2%.