Did Elon Musk Buy X (Twitter) Stock Before Before He Purchased the Company?

Elon Musk has been ordered again to testify in a Securities and Exchange Commission probe about alleged non-disclosures before he announced he was buying Twitter. The last time he was ordered to testify the Tesla CEO refused, ignoring the SEC’s subpoena.

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In the months leading up to his announcement about acquiring Twitter, Musk embarked on a buying spree of Twitter’s stock. According to the SEC, he did not report that he had done so. U.S. securities laws mandate that investors must report purchases that give them a significant stake in a company, a rule designed to maintain transparency and prevent an unfair market advantage.

In an attempt to investigate these purchases, the SEC subpoenaed Musk, demanding his testimony regarding the timing and nature of his acquisitions. Musk’s failure to appear for this testimony has only intensified the spotlight on him.

Why Is the SEC Suing Elon Musk?

The lawsuit from the SEC against Musk is essentially about him not disclosing his purchase of a large portion of Twitter’s stock in the months before he announced his intention to buy the company. U.S. laws require that when someone buys enough shares to own a significant part of a company, they must file disclosures with the SEC.

Investors who are accumulating shares beyond a 5% stake in a company are required to file a Schedule 13D form with the SEC to disclose their ownership. These filings must occur within a specified timeframe after the threshold is crossed, usually within 10 days. These disclosures are public, which means that all investors in the market have access to the same information.

According to the SEC, Musk didn’t follow these rules, keeping critical information from the public. This is important because knowing who owns large parts of a company can influence how people buy or sell that company’s stock.

Musk is a public figure, and his investment moves can significantly impact how others view and invest in a stock. If he buys a lot of shares and doesn’t disclose it, the market may behave differently than if he followed disclosure rules. Musk’s investments and tweets can sway market sentiments and influence the trading behavior of other investors, potentially leading to market movements. Examples of this include his tweets about various cryptocurrencies, such as Dogecoin.

Why Didn’t Musk Disclose His X (Twitter) Stock Purchase?

No one can say for sure why Musk didn’t file disclosures for his Twitter stock purchase.

One possible reason is that by not disclosing stock purchases right away, a buyer might hope to avoid a premature increase in stock prices, which would make acquiring additional shares more expensive. This tactic can be particularly appealing if the buyer is trying to accumulate a significant stake quietly.

Another possibility is that it was an oversight or misunderstanding of regulatory requirements. An individual or their legal team might misinterpret SEC regulations, leading to delays in filing the necessary disclosures.

Elon Musk’s History With the SEC

The Tesla CEO’s history with the SEC is marked by a series of public clashes and criticisms, showcasing his frustration with the regulatory body’s oversight. Musk’s contention with the SEC primarily revolves around what he perceives as restrictions on his freedom to communicate about his business ventures, particularly on social media platforms.

This tension reached a notable point in 2018 when he settled with the SEC after the commission investigated him over tweets about potentially taking Tesla private. Musk publicly described this settlement as unjust, indicating his belief that the agreement was more about eliminating distractions for Tesla’s progress rather than acknowledging any wrongdoing on his part.

FAQ

• How much did Elon Musk pay to buy Twitter (X)?

  • Musk's purchase of Twitter stock before his announcement to acquire the company involved buying shares at prevailing market prices over a period. The exact amount he paid for each share during this buying spree is not detailed in public disclosures. However, his ultimate acquisition of Twitter as a company was a deal valued at approximately $44 billion.

• Can you still buy (X) Twitter stock?

  • Twitter became a privately held company following its acquisition by Musk. This means that the company's stock is no longer publicly traded on any stock exchange, and therefore individual investors cannot buy it through public markets.

• Do I lose my shares if a company goes private?

  • When a company goes private, public shareholders typically have their shares bought out as part of the process. This means you would receive compensation for each share you own at the agreed buyout price. The buyout price is often at a premium to the market price prior to the announcement of the company going private.

This article originally appeared on GOBankingRates.com: Did Elon Musk Buy X (Twitter) Stock Before Before He Purchased the Company?