Tesla (TSLA, Financial) CEO Elon Musk is being sued by the U.S. Securities and Exchange Commission (SEC) for failing to timely disclose his purchase of over 5% of Twitter stock in March 2022. According to the SEC, Musk did not reveal he had crossed the 5% ownership threshold within the required timeframe, allowing him to artificially suppress the price of Twitter shares while continuing to buy. The SEC alleges that this delay resulted in Musk paying at least $150 million less than he otherwise might have.
The rules mandate that once an investor surpasses the 5% threshold, they must disclose their holdings within 10 days. However, Musk disclosed his stake 11 days late, by which time he had already accumulated over 9% of Twitter. Following his disclosure, Twitter's stock price saw an immediate increase of more than 27%.
The SEC is seeking civil penalties and the return of ill-gotten gains from Musk. This lawsuit highlights the importance of timely disclosures in maintaining market integrity and fair trading practices.
