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The U.S. Securities and Exchange Commission says Musk's failure to disclose his holdings allowed him to avoid paying $150 million in stock.
Elon Musk is being sued by the United States securities regulator for failing to disclose his Twitter holdings in time before buying the social media platform.
The US Securities and Exchange Commission (SEC) said on Tuesday that Musk did not disclose within the required 10-day period that he had acquired more than 5 percent of Twitter's stock in March 2022.
The Tesla and SpaceX CEO's failure to notify regulators allowed him to continue buying stock at “artificially low prices,” the SEC said in a filing with the U.S. District Court in the District of Columbia.
Musk's actions ultimately allowed him to “default on at least $150 million in shares he purchased after the beneficial ownership report expired,” the SEC said.
Musk finally informed regulators that he had acquired more than 9 percent of Twitter's stock on April 4, 2022, 11 days after the disclosure, the SEC said.
Twitter's share price that day was up 27 percent from the previous day's close, according to the regulator.
“Because Musk failed to promptly disclose his beneficial ownership, he was able to make these purchases from the unsuspecting public at artificially low prices that still did not reflect the undisclosed material information about Musk's beneficial ownership of more than five percent of the common stock of Twitter and investment objective,” the securities regulator said.
“In total, Musk paid Twitter investors more than $150 million for his purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered significant economic damage.
U.S. securities regulations require investors who buy more than 5 percent of a company's stock to disclose their stake so shareholders can make informed investment decisions.
The SEC has sued Musk twice before, including over a 2018 Twitter post in which he claimed he had secured financing so he could eventually take electric car company Tesla private.
Musk settled that case by paying a $20 million civil penalty, agreeing to subject some of his social media activity to legal review, and stepping down from his role as Tesla chairman.
Musk completed the purchase of Twitter in October 2022. for $44 billion after signing an acquisition deal it later tried to back out of.
The SEC's latest enforcement action, which was announced with little fanfare, comes days before Chairman Gary Gensler steps down on January 20, the day of US President-elect Donald Trump's inauguration.
It is unclear whether the lawsuit against Musk, one of Trump's most powerful allies, will continue under Trump, who has named Paul Atkins, a former SEC commissioner, as Gensler's successor.
