The securities and Exchange Commission is investigating Elon Musk's delay in disclosing his substantial stake in twitter last month, people familiar with the matter said. This delay allowed him to buy more shares without notifying other shareholders. The SEC is investigating Musk's delay in filing public forms, people familiar with the matter said.
According to the regulations, investors must submit public forms when purchasing more than 5% of the shares of a company. This disclosure is an early signal to shareholders and companies that a significant investor may try to control or influence a company. Musk submitted the form on April 4, at least 10 days later than he reached the disclosure threshold. Musk did not publicly explain why the form was not submitted in time.
Daniel Taylor, an accounting professor at the University of Pennsylvania, said musk did not report that his stake in twitter had exceeded the disclosure threshold of 5%, which may have saved him more than $143 million (about 961 million yuan), because if the market knew that the billionaire held more and more shares, Twitter's share price might be higher.
The SEC may abandon the investigation without civil litigation, because not all investigations will lead to formal litigation. The SEC lawsuit against musk is unlikely to disrupt the twitter deal because the twitter board has approved the deal. Jill E. Fisch, a professor of securities and corporate law at the University of Pennsylvania, said the SEC usually lacked the power to block mergers or privatisation transactions. In addition, musk is also required to investigate whether certain large businesses and individuals have violated a federal law.
