The Securities and Exchange Commission has expanded its investigation into whether Elon Musk properly disclosed his investment in Twitter and his intentions for the social media company, the agency said in a filing Thursday.
The agency raised questions about a tweet from Mr Musk in May in which the billionaire claimed his $44 billion acquisition of Twitter “couldn’t move forward” because of spam on the platform. The tweet suggested that Mr. Musk planned to walk away from the deal, the SEC wrote in a letter to Mr. Musk’s lawyers in June. The letter was included in a filing on Thursday.
The about-face was a material change in Twitter’s status that should have been disclosed to the agency and investors, but the required disclosure never materialized, the SEC wrote in its letter. The agency also demanded “a clear statement about Mr. Musk’s current plans or proposals regarding the acquisition of Twitter.”
In response, Mr Musk’s legal team said he had not changed his plans and was simply seeking more information on Twitter. “Despite Mr. Musk’s desire for information to assess potential spam and fake accounts, there have been no material changes to Mr. Musk’s plans and proposals regarding the proposed transaction at this time. ”, wrote Mike Ringler, a lawyer for Mr. Musk. in a June letter to the SEC
Last week, Mr Musk said he would end his contract with Twitter due to the prevalence of spam on the platform. Twitter disputed Mr Musk’s claims and said spam accounts for no more than 5% of its active users. On Tuesday, the company sued Mr. Musk to force the acquisition.
The SEC began investigating Mr. Musk’s actions in April, when the billionaire became Twitter’s largest shareholder. In a securities document filed at the time, Mr. Musk indicated that his investment would be passive and that he had no intention of taking control of the company. But 10 days later, he launched an aggressive campaign to acquire Twitter.
The SEC questioned whether Mr. Musk was really a passive investor and whether he disclosed his stake at the right time. The law requires shareholders who buy more than 5% of a company’s stock to disclose their ownership within 10 days of reaching that threshold. In regulatory filings, Mr. Musk said he crossed that threshold on March 14 but only made his purchases public on April 4.
The investigation is not Mr. Musk’s first contact with the SEC In 2018, the agency accused him of securities fraud over a tweet in which he claimed to have obtained funding to take private Tesla, his company of electric vehicles. Mr. Musk and Tesla settled the charges for $40 million. Under the terms of the agreement, Mr. Musk must have his tweets executed by a Tesla attorney if the posts contain material statements about the automaker.