SEC Expands Investigation into Elon Musk’s Twitter Disclosures

The Securities and Exchange Commission expanded its investigation into Elon Musk has duly disclosed its investment in Twitter and its intentions for the social media company, the agency said in a statement Thursday.

The agency raised questions over a tweet by Mr Musk in May in which the billionaire said his $44 billion acquisition of Twitter “can’t move forward” due to spam on the platform. The tweet suggested Mr. Musk planned to pull out of the deal, the SEC said in the letter. Musk’s lawyers in June. The letter was added to the case on Thursday.

The change in Twitter’s status was a material change that should have been communicated to the agency and investors, but the required disclosure was never made, the SEC letter said. The agency also requested “clear statements regarding Mr. Musk’s current plans or proposals for the acquisition of Twitter.”

In response, Mr. Musk’s legal team said he had not changed his plans and was simply looking for more information on Twitter. “Despite Mr. Musk’s desire to obtain information to assess potential spam and fake accounts has not changed significantly. Musk’s plans and proposals for the proposed deal at this time.” — Mike Ringler, attorney for Mr. Ringler. Musk wrote in letter in June at the SEC

Mr. Musk said last week that he would terminate his deal with Twitter due to the prevalence of spam on the platform. Twitter disputed Mr. Musk claims that spam makes up no more than 5 percent of his active users. On Tuesday, the company sued the city of Musk force the acquisition.

The Securities and Exchange Commission launched an investigation into Mr. Musk’s actions in April when the billionaire became largest shareholder of Twitter. In a securities filing filed at the time, Mr. Musk has indicated that his investment will be passive and that he does not intend to seek control of the company. But 10 days later, he launched an aggressive campaign to acquire Twitter.

The SEC questioned whether Mr. Musk was indeed a passive investor, and whether he disclosed his stake at the right time. The law requires shareholders who buy more than 5 percent of a company’s shares to disclose their ownership within 10 days of reaching that threshold. In the regulatory documents Mr. Musk said he crossed that threshold on March 14, but did not release information about his purchases until April 4.

Musk’s first run-in with the SEC In 2018, the agency charged him with securities fraud over a tweet in which he claimed he had received funding to take Tesla, his electric vehicle company, private. mr. Musk and Tesla settled the charges for $40 million. Under the terms of the agreement, Mr. Musk must have his tweets reviewed by a Tesla lawyer if the tweets contain material statements about the automaker.

Counsel for Mr. Musk and the SEC did not immediately respond to requests for comment.