Musk's Row With Twitter Opens Him To Deeper SEC Investigation

The U.S. Securities and Exchange Commission (SEC) may investigate whether Elon Musk deceived the market over the process of his $44 billion deal to acquire Twitter Inc., Michelle Price reported for Reuters.

Photo Insert: Twitter's stock has been on a roller coaster ride since Musk declared his investment in the firm on April 4.

Twitter on Tuesday (Wednesday, July 13, in Manila) requested a Delaware court to order the Tesla Inc CEO and world's richest person to complete the merger, launching what promises to be one of Wall Street's largest legal battles.

Musk announced on Friday that he was terminating the arrangement because Twitter had broken the terms of the contract by failing to respond to requests for information on fraudulent or spam accounts on the network, which is essential to its commercial performance.

In its complaint filed on Tuesday, Twitter not only argued that Musk backed out for financial reasons and violated the terms of the agreement, but also that Musk violated U.S. securities regulations by failing to declare his 9 percent stake in Twitter on time.

Twitter further alleges that Musk misrepresented Twitter's management of the spam accounts issue and his conversations with the social media business, "with equally misleading implications about the likelihood that the merger would be completed and about Twitter’s operations."

Since Musk declared his investment in the firm on April 4, Twitter's stock has been on a roller coaster ride, surging 27 percent initially and peaking to over $52 after the purchase was finalized on April 25, before sliding to roughly $38 on Wednesday.

The SEC has been embroiled in a fight with Musk ever since the billionaire tweeted in 2018 that he had secured funds to take Tesla private, despite the SEC's discovery that he did not. According to court documents and media reports, the agency already has multiple open investigations concerning Musk.

Stephen Crimmins, a lawyer at Davis Wright Tremaine LLP and former SEC litigator, said, "When you're dealing with statements about public companies that have an impact on stock prices, the SEC's antenna goes sky-high." In light of Musk's recent experience with the SEC, it is imperative that the SEC investigate this matter.

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