New York
CNN
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The US Securities and Exchange Commission sued Elon Musk on Tuesday for failing to properly disclose his ownership of X, then known as Twitter, which allowed him to buy shares of the platform at “artificially low prices.”
Before he closed his $44 million deal to buy Twitter in October 2022, Musk began to acquire a “significant number” of Twitter shares. By March 2022, he owned more than 5% of the company’s common stock and was required to disclose that to the SEC within 10 calendar days. The filing alleged that Musk failed to disclose that information.
Musk and his wealth manager did not disclose the purchases because Twitter’s stock price could shoot up as a result, the suit alleged.
In keeping these purchases at low prices, Musk “underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period,” according to the complaint, which was filed in DC federal court.
Although Musk was required to disclose his 5% ownership by March 24, 2022, he purchased almost 3.5 million shares the next day, increasing his stake in the company to 7%, according to the lawsuit. He also expressed interest in acquiring Twitter to a member of the company’s board of directors.
Musk joined Twitter’s board and formally disclosed his stake in the company in early April 2022, according to the lawsuit. By the time he disclosed his stake, he owned more than 9% of the company and “Twitter’s stock price increased more than 27%,” the suit said.
“Musk paid significantly less for the shares of Twitter common stock he purchased between March 25, 2022 and April 1, 2022 than if he had timely disclosed,” the suit said, adding that he spent more than $500 million acquiring shares during that time period.
The SEC has been probing the Tesla and SpaceX CEO over his acquisition of the social media platform. Last year, he ran into trouble with the commission because he failed to appear for testimony in the investigation.
CNN has reached out to Musk’s lawyer, Alex Spiro, for comment.
This is a developing story and will be updated.