According to the richest man in the world, this is an administrative mistake, without intent and without investors suffering damage. His lawyers state in court documents, viewed by Reuters and Bloomberg, that he submitted the form immediately as soon as he received legal advice and that these types of cases normally yield a small fine at most.
Notification obligation
The SEC sees that differently. Anyone who owns more than 5 percent of a stock market company must make it public within ten days. Musk passed that limit on March 14, 2022, but only submitted his paperwork on April 4. According to the regulator, Musk thus exceeded the reporting obligation with eleven days.
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In the meantime, he continued to purchase shares in silence: for more than $ 500 million. According to the SEC, that saved him at least 150 million dollars. Investors who sold during that period did so without knowing that the richest man in the world was building a major position of power behind the scenes. When Musk finally announced his interest, the rate of Twitter raised by 27 percent.
Spreading purchases
The official complaint shows that Musk did not just report. His asset manager and stock market broker let the purchases spread in such a way that the course would not rise too much.
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More already played in the background. Even before his report, Musk spoke with board members of Twitter about accession to the board of directors and about a possible takeover. On March 27 he told a commissioner that he had at least seven percent. On March 31, he even sat at the table with the CEO and announced that a takeover was on the table. On 3 April he accepted a seat on the board orally.
Price -sensitive information
For the SEC it is crystal clear. Musk consciously benefited from price -sensitive information that the public did not yet know. According to the supervisor, it does not even matter under American legislation whether there was intent. The SEC therefore not only demands a fine, but also that Musk pays off his unlawfully obtained benefit, with interest.
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It is not the first time that Musk clashes with the stock market watchdog. In 2018 he ran into problems after tweets in which he claimed that he would remove Tesla from the stock market and that the financing was ‘certain’. According to the SEC, that was wrong, after which Musk and Tesla made a settlement of a total of 40 million dollars and he had to temporarily step as chairman.