Elon Musk’s Twitter acquisition bid is getting longer than expected, dragging other issues along as it lingers beyond what many had hoped for. From the issue of bot to asking for lower price, and now the process of acquiring his earlier shares that has come under probe, Musk’s Twitter takeover bid is wallowing in chaos that has contributed to volatile price swings in the company’s stock price.
In April, Musk announced that he’s taken a nine percent stake in Twitter, after expressing his desire to see the app thrive on free speech. But the shares are believed to have been bought by Musk in a manipulative way, and now the U.S. Securities and Exchange Commission (SEC) is looking to unravel if the purchase is anyway dubious.
The SEC is looking into Tesla Chief Executive Officer Elon Musk’s disclosure of his stake in Twitter Inc. in early April, according to a letter the agency sent to him that month.
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In the letter, now made public by the SEC, the regulator asks Musk why it appears he did not file required paperwork within 10 days of the acquisition, and also questions why, when Musk did disclose his stake, he used a form meant for passive investors while he was openly questioning Twitter’s policies around free speech.
The SEC specifically asked Musk to explain why he opted to initially file a “13G” disclosure form, which is meant for investors who plan to hold their shares passively instead of a “13D” form, which is for activist investors who intend to influence management and policies of the company. He later amended the filing. Musk was offered a board seat shortly after his initial disclosure and has since gone on to attempt to buy the company outright in a $44 billion deal to take it private.
In another case, Twitter shareholders are suing Elon Musk, and Twitter itself, over their handling of the acquisition process that has turned chaotic. Since Musk’s acquisition bid, Twitter’s share price has dived more than 12%, and Tesla’s is down about 28% as part of a broad sell-off in tech stocks.
The downturn of both Tesla and Twitter stocks are now are pitting the companies’ shareholders against Musk.
Musk is not a newbie when it comes to sparring with the SEC as he had squared off with the Commission in the past. The SpaceX founder got into trouble with the SEC in 2018, when the agency sued him for tweeting that he had “funding secured” to potentially take his electric car company, Tesla, private at $420 per share. But in reality, a buyout was not close.
But as noted by Indiatimes, which cited outside experts, the financial consequences for the world’s richest man could be limited, as fines for such a misstep would likely rise to a few hundred thousand dollars. And others were skeptical it could endanger Musk’s efforts to acquire Twitter.
“I think from that investigation standpoint, the SEC is going to have a pretty strong case that he’s violated securities laws,” said Josh White, a finance professor at Vanderbilt University who previously worked at the SEC as a financial economist. However, he added it “would be disastrous if [the SEC] said, well, this Twitter deal is on hold because Musk filed the wrong form.”
“Twitter stock price would instantly drop … I don’t think that the Commission has an interest in necessarily standing in the way of the deal.”
CNBC reports that the proposed lawsuit from Twitter shareholders also alleges that Musk broke California laws by sowing doubt about whether he would complete the deal after signing the contract to buy it.
Musk said earlier this month he was putting the Twitter acquisition “on hold” until he is certain of the number of bots on the platform. The shareholders’ complaint added that his gripes about “bots” were part of a scheme to negotiate a better price or kill the deal.