Elon Musk’s 'Delay' in Disclosing Hefty Twitter Stake Reportedly Prompted Oversight Agency Probe

© AFP 2023 / RYAN LASHThis handout image released by TED Conferences shows Tesla chief Elon Musk speaking during an interview with head of TED Chris Anderson (out of frame) at the TED2022: A New Era conference in Vancouver, Canada, April 14, 2022
This handout image released by TED Conferences shows Tesla chief Elon Musk speaking during an interview with head of TED Chris Anderson (out of frame) at the TED2022: A New Era conference in Vancouver, Canada, April 14, 2022 - Sputnik International, 1920, 12.05.2022
In April, SpaceX CEO and Tesla founder Elon Musk reached an agreement with Twitter on the purchase of the social media network for about $44 billion after he initially revealed that he had become the social media platform’s largest shareholder.
US regulators are looking into the circumstances around billionaire tech guru Elon Musk's delayed disclosure of his hefty stake in Twitter Inc (TWTR.N) in April, The Wall Street Journal reported.
Musk revealed he held a 9.2 percent stake in the microblogging platform to the US Securities and Exchange Commission (SEC) on 4 April, according to sources cited by the WSJ.
When a person or group acquires 5 percent or more of a company's voting shares, they must report it to the SEC to provide transparency regarding who the shareholders are and why they have obtained a significant stake in the company. Among the questions one is required to answer in the Schedule 13D form filed with the SEC is the purpose of the transaction, such as a hostile takeover or merger.
This allows existing shareholders in the company to make informed investing and voting decisions. The Schedule 13D form must be filed within 10 days.
In Musk’s case, the report claimed, there was a delay of at least 10 days after his stake exceeded the trigger point for disclosure.
In this file photo taken on February 10, 2022 Elon Musk gestures as he speaks during a press conference at SpaceX's Starbase facility near Boca Chica Village in South Texas - Sputnik International, 1920, 07.05.2022
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Elon Musk’s holdings topped 5 percent on 14 March, securities filings show. Accordingly, he should have filled out the public form in question by 24 March. Incidentally, that is the date when Musk purchased approximately $513 million in stock at prices between $38.20 and $40.31 a share, according to a regulatory filing cited by the outlet.
As the closing price for a Twitter share was $49.97 on 4 April - the day the SpaceX CEO disclosed his stake, he may have saved more than $143 million on those trades, Daniel Taylor, a University of Pennsylvania accounting professor, estimated, as cited by the WSJ.
Furthermore, Elon Musk's delayed filing characterised his stake as “passive”, in other words, not seeking to influence or change control of a company.
Accordingly, the billionaire’s filing meant he did not plan to take over Twitter or influence its management or business. But already the next day, the outlet writes, Elon Musk was offered a position on Twitter's board - which he rejected.
Shortly after, the world's richest man, reportedly worth $260bn (£200bn), clinched a $44 billion deal to buy the social media giant.
FILE - In this Feb. 8, 2018, file photo, the logo for Twitter is displayed above a trading post on the floor of the New York Stock Exchange - Sputnik International, 1920, 08.05.2022
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The buyout, which needs to be approved by Twitter stockholders, is scheduled to close out later this year.
While SEC investigators are believed to have requested documents from Twitter to probe whether Musk should have been more forthcoming about his plans in his initial disclosure, there has not been any official comment from the regulator.
In a separate development, reported earlier by The Information website, the Federal Trade Commission is allegedly investigating whether Elon Musk violated a law that requires companies and people to report large transactions to antitrust-enforcement agencies.
According to guidelines, before buying more shares after making the filing, an investor is required to wait at least 30 days. This allows the government to review the purchase from the position of whether it hurts competition. Failing to comply with the rules about reporting significant stock purchases can be fined up to $43,792 per day.
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