The US Securities and Exchange Commission (SEC) has announced that it is launching an investigation into Elon Musk’s recent acquisition of Twitter, the social media giant. The SEC said in a statement that it is looking into whether Musk violated any securities laws or regulations when he announced he bought Twitter for $50 billion on April 14, 2023.
Business magnate Elon Musk published his first tweet on his personal Twitter account in June 2010, and had more than 80 million followers by April 2022. In 2017, in response to a tweet suggesting that he buy Twitter, Inc., Musk replied, “How much is it?” On March 24, 2022, Musk began tweeting criticisms of Twitter, polling his followers on whether the company adhered to the principle that “free speech is essential to a functioning democracy.”
Musk subsequently makes an offer to buy Twitter for $54.20 a share, or about $44 billion — a price well above the company’s stock price at the time. He says his goal is to apply free speech principles to the platform, which he claimed had been mismanaged. “The company will neither thrive nor serve this societal imperative in its current form,” he writes. “Twitter needs to be transformed as a private company.”
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Musk, who is the founder and CEO of Tesla and SpaceX, surprised the world when he tweeted that he had secured funding to take Twitter private at $54.20 per share, a 40% premium over its closing price on March 30. He said that he wanted to make Twitter a more innovative and user-friendly platform, and that he had the support of Twitter’s board and CEO Jack Dorsey. He also said that he would allow existing shareholders to keep their shares or sell them at the offer price.
However, the SEC is concerned that Musk may have misled investors or manipulated the market with his announcement, which caused Twitter’s stock to soar by 35% in one day. The SEC is also investigating whether Musk had actually secured the funding he claimed, and whether he followed the proper disclosure procedures for such a major deal. The SEC has subpoenaed Musk, Twitter, and several banks and investors involved in the transaction, and has asked them to provide documents and information related to the deal.
The SEC’s investigation could have serious consequences for Musk, who has a history of clashing with the regulator. In 2018, he was sued by the SEC for fraud after he tweeted that he had secured funding to take Tesla private at $420 per share, which turned out to be false. He settled the case by agreeing to pay a $20 million fine and step down as Tesla’s chairman.
He also agreed to have his public statements about Tesla reviewed by a lawyer before posting them online. However, in 2019, he was found in contempt of court for violating the settlement agreement by tweeting inaccurate information about Tesla’s production numbers. He avoided further penalties by agreeing to a revised settlement that specified which topics he needed approval for before tweeting.
If the SEC finds that Musk violated any securities laws or regulations with his Twitter bid, he could face civil or criminal charges, fines, injunctions, or even a ban from serving as an officer or director of a public company. He could also face lawsuits from shareholders or regulators who claim that they suffered losses or damages as a result of his actions.
Musk has not commented on the SEC’s investigation, but he has continued to tweet about his plans for Twitter. He said that he wants to make Twitter a more democratic and decentralized platform, where users can create their own rules and communities. He also said that he plans to integrate Twitter with his other ventures, such as Neuralink, Starlink, and The Boring Company. He said that he hopes to complete the deal by the end of 2023, pending regulatory approval and shareholder vote.
