The Securities and Exchange Commission (SEC) has contacted Elon Musk to inquire about why he was late to file the necessary form for the Twitter takeover.
The US financial watchdog published a letter that it had sent to the Tesla CEO in which it asked a series of questions about how he declared his acquisition of a 9.2% stake on 4th April.
This move instigated a series of corporate activities, which led to Twitter accepting a $44 billion takeover from Musk. However, the deal has since been put to a halt.
The SEC’s letter
In the 4th April letter, the SEC inquires why a schedule 13G form declaring Elon’s acquisition of a large shareholding does not ‘appear to have been filed within the necessary ten days of his stake passing 5%.
According to Musk’s filing, his stake passed 5% on 14th March. Therefore, the SpaceX CEO should have filed the form by 24th March.
The SEC said that once it had reviewed Musk’s reply, it ‘may have additional comments.’ The letter further asks Musk to explain why he filed 13G, which is for passive investors and not those who want to shake up the business under consideration. One day after filing his first form, he refiled it as a 13D for investors who intend to take an active role.
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The SEC asked Musk to provide an in-depth analysis of why he thought he could depend on a clause that permits passive investors to file a 13G instead of 13D. The watchdog also asked Musk to address, in the analysis, the tweets posted by him in which he ‘rigorously adheres to free speech principles.’
Trouble in paradise?
A professor of law at Columbia University, John Coffee, said that the letter did not discuss the start of a formal investigation. However, this may have changed since the date the letter was sent.
‘’Is Musk in trouble? He should be. Not only was he late in filing while he was buying more shares, but his various tweets hinted at market-moving news and may have manipulated the market,’’ Coffee added.
Elon Musk’s Twitter takeover has not been easy, as he put the deal on hold to get a precise analysis of the number of bots on the site. But, this is not all.
Investors have also filed a lawsuit against him, in which they claimed that Musk had saved himself $156 million by failing to reveal that he had bought a 5% stake in Twitter in a timely manner.