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Musk Faces SEC Quiz For Failing To Disclose Twitter Stake Earlier
- By The Financial District
- Apr 9, 2022
- 2 min read
For the first several months of 2022, billionaire Tesla CEO Elon Musk was quietly buying up a nearly 10% stake in Twitter.
Photo Insert: Musk's failure to disclose his move to purchase a stake in Twitter has fanned the flames for regulators who are already hot for the world's richest man.
Between January and April, Musk spent $2.64 billion on Twitter stock — a fact he disclosed to the Securities and Exchange Commission (SEC) on Monday, April 4, Ben Gilbert reported for Business Insider.
That disclosure to the SEC was 11 days overdue, according to a new Washington Post report, and Musk potentially earned upwards of $156 million in stock value as a result of the late filing.
That's because the disclosure that Musk is now Twitter's largest single shareholder at 9.2%sent the company's stock price skyrocketing. After Musk revealed his investment, Twitter's stock price leapt by 31%.
Had he disclosed his investment according to SEC guidelines, which require disclosure when a shareholder accumulates more than 5% of a company's stock, the remaining 4.1% he purchased would've cost a lot more money: Approximately $156 million more, according to legal and securities experts speaking with the Washington Post.
That's assuming that the stock price would've risen by the same amount had Musk disclosed his investment earlier, and that Musk would've purchased the same overall amount of Twitter stock.
Musk could face a fine from the SEC, but it's unlikely to come anywhere close to the $156 million he earned by not disclosing his investment earlier, experts told the Washington Post.
As part of his appointment to the Twitter board, where he would sit until 2024, Musk isn't allowed to "become the beneficial owner of more than 14.9% of the company's common stock outstanding at such time" — which is to say that, while he serves on the board and for 90 days following, he isn't allowed to take a stake in Twitter larger than 14.9%.
