WASHINGTON (Parliament Politics Magazine) – The watchdog for the US financial has approached Elon Musk regarding his Twitter stake disclosure, inquiring as to why the Tesla CEO appeared to have filed a vital document late.
The SEC has sent a letter to the world’s richest man, in which it raises a series of questions regarding how he declared his 9.2% ownership on April 4th. The move sparked a flurry of corporate activity, culminating with Twitter accepting Musk’s $44 billion (£35 billion) buyout bid on April 25 – however he has since said that the purchase is “on hold” while he investigates the amount of fake accounts on Twitter.
The SEC queried why a schedule 13G form declaring Musk’s acquisition of a big shareholding “does not appear” to have been filed within the minimum 10 days after the stake crossing the 5% level at which it must be publicly declared in the 4 April letter. According to Musk’s filing, he reached the 5% threshold on March 14 and thus the form should have been filed by March 24.
“Please advise us why the schedule 13G does not appear to have been made within the required 10 days from the date of acquisition as required by rule 13d-1(c), the rule on which you represented that you relied to make the submission,” the SEC wrote in a letter dated 10 days before Musk’s takeover announcement.
The SEC stated that it “may have additional comments” after reviewing Musk’s response. Musk settled with the Securities and Exchange Commission in 2018 over a tweet in which he indicated he was considering taking Tesla private and had money secured for the project.
On Wednesday, investors filed a complaint against Musk, alleging that Musk saved $156 million by neglecting to report that he had purchased over 5% of Twitter in a timely manner.
Musk is also asked to explain why he filed a 13G, which is for passive investors who aren’t planning to disrupt the business. The SEC points out that if an investor buys shares with the goal of influencing or changing the control of the firm in question, they must file a 13D form. Musk re-filed his initial form as a 13D, which is for investors who want to participate actively.
The main distinction between a 13D and a 13G filing was the purchaser’s intent. If the buyer wanted to exert control – however narrowly defined – he needed to file a D, according to Brian Quinn, an associate professor of law at Boston College. The 13D sent a strong message to the market that the buyer intended to remain involved in the firm. The 13G indicated that the buyer desired to be passive and not to exert control.
According to John Coffee, a Columbia University law professor, the letter did not signal the commencement of a formal investigation, though that may have altered at the time it was written. Technically, that was not an investigation because there was no indication that it had been referred to the enforcement division (although it might have been because that letter was dated over a month and a half ago), he stated. Did Musk have a problem? He ought to be. Not only was he late in filing while buying more shares, but his many tweets indicated market-moving news and might have manipulated the market, Coffee said, referring to a tweet Musk posted on April 20 that hinted at a tender bid for the company.
