The Securities and Exchange Commission has expanded its investigation into whether Elon Musk properly disclosed his investment in Twitter and his intentions for the social media company, the agency said in a filing Thursday.
The agency questioned a tweet from Mr. Musk in May in which the billionaire claimed his $44 billion takeover of Twitter “cannot go on” due to spam on the platform. The tweet suggested Mr. Musk intended to cancel the deal, the SEC wrote in a letter to Mr. Musk’s lawyers in June. The letter was in a file on Thursday.
The turnaround was a material change in Twitter’s status that should have been disclosed to the agency and investors, but the required disclosure never materialized, the SEC wrote in its letter. The agency also demanded “a clear statement about Mr. Musk’s current plans or proposals regarding the Twitter acquisition.”
In response, Mr. Musk’s legal team said he had not changed his plans and had simply sought more information on Twitter. “Despite Mr. Musk’s desire to obtain information to evaluate the potential spam and fake accounts, there was no material change at the time in Mr. Musk’s plans and proposals regarding the proposed transaction,” wrote Mike Ringler. , an attorney for Mr. Musk. in a June letter to the SEC
Last week, Mr. Musk stated that he would end his deal for Twitter due to the widespread spam on the platform. Twitter has disputed Mr. Musk’s claims, saying that spam makes up no more than 5 percent of its active users. On Tuesday, the company sued Mr. Musk to enforce the acquisition.
The SEC began investigating Mr. Musk’s actions in April, when the billionaire became Twitter’s largest shareholder. In a securities document filed at the time, Mr. Musk indicated that his investment would be passive and that he had no intention of taking control of the company. But 10 days later, he started an aggressive campaign to take over Twitter.
The SEC questioned whether Mr. Musk was really a passive investor and whether he disclosed his interest at the right time. The law requires shareholders who purchase more than 5 percent of a company’s stock to disclose their ownership within 10 days of reaching that threshold. In legal filings, Mr. Musk has said he crossed that threshold on March 14, but didn’t make his purchases public until April 4.
The investigation is not the first time Mr. Musk has come into contact with the SEC. In 2018, the agency charged him with securities fraud over a tweet claiming he had obtained funding to take Tesla, his electric vehicle company, private. Mr. Musk and Tesla settled the costs for $40 million. Under the terms of the agreement, Mr. Musk must have his tweets run by a Tesla attorney if the posts contain material statements about the automaker.
A lawyer for Mr. Musk did not respond to a request for comment. The SEC declined to comment.
