The Securities and Exchange Commission revealed Friday that it had begun investigating Elon Musk’s purchases of Twitter stock in early April and whether he had properly disclosed his interest and intentions for the social media company.
In a registration request, the agency said it approached Mr. Musk on April 4. At the time, Mr. Musk, the richest man in the world, had just become Twitter’s largest shareholder with a 9.2 percent stake in the company. Mr. Musk also filed a securities document indicating that he intended to make the investment passively and had no intention of pursuing control of the company.
Ten days later, Mr. Musk offered $54.20 a share to buy Twitter outright. Twitter later agreed to sell itself to Mr. Musk for about $44 billion; the transaction is expected to close in the coming months.
In an April 4 letter to Mr. Musk, the SEC questioned whether it disclosed its interest at the appropriate 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 regulatory documents, Mr. Musk has said he crossed that threshold on March 14, but didn’t make his purchases public until April 4.
In its letter, the SEC also questioned whether Mr. Musk really was a “passive” investor, as he had already publicly criticized Twitter’s content moderation policies and tweeted recommendations about how the social media company should be changed.
Filing as a “passive investor” while secretly planning to acquire a company is “fraudulent,” some legal experts have said. Such cases are rarely prosecuted and are difficult to prove, she added.
The SEC declined to comment. Mr. Musk did not respond to a request for comment. A lawyer for Mr. Musk declined to comment.
The Federal Trade Commission is also investigating whether Mr. Musk violated disclosure requirements by failing to notify the agency of his significant stake in Twitter. Investors typically must notify antitrust regulators of major stock purchases to give government officials 30 days to review the transaction for competition violations.
Mr. Musk, who is also the chief executive of electric car company Tesla and rocket maker SpaceX, has previously been embroiled in the SEC. He faced an investigation from the regulator in 2018 when he announced on Twitter that he planned to take Tesla private and that he had secured funding for the deal.
The SEC accused Mr. Musk of securities fraud because the transaction he referred to was uncertain and the funding was not blocked. Mr. Musk and Tesla settled for $40 million. Under the terms of his agreement with the regulator, Mr. Musk must run his tweets through a Tesla attorney if they contain material statements about the automaker. Last month, Mr. Musk tried to end the tweet-approval settlement in court, but a judge rejected his request.
Mr. Musk has a lawsuit pending over his tweet claiming he intended to take Tesla private. Mr. Musk is also facing a lawsuit from Twitter shareholders over his delayed disclosure about his purchases of shares in the social media company.
