The Securities and Exchange Commission has expanded its investigation into whether Elon Musk correctly disclosed his investment in Twitter and his intentions for the social media company, the agency revealed Thursday in a filing.
The agency raised questions about a tweet from Musk in May in which the billionaire claimed his $44 billion acquisition of Twitter “cannot go forward” due to spam on the platform. The tweet suggested that Musk planned to walk away from the deal, the SEC wrote in a letter to Musk’s lawyers in June. The letter was included in a presentation on Thursday.
The change in attitude 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 required “a clear statement about Mr. Musk’s current plans or proposals regarding the acquisition of Twitter.”
In response, Musk’s legal team said it had not changed its plans and was simply seeking more information on Twitter. “Despite Mr. Musk’s desire for information to assess potential spam and fake accounts, there were no material changes in Mr. Musk’s plans and proposals regarding the proposed transaction at that time,” Mike Ringler wrote, Musk’s attorney. in a letter in June to the SEC
Last week, Musk declared that he was ending his contract with Twitter due to the prevalence of spam on the platform. Twitter has disputed Musk’s claims, saying spam accounts for no more than 5 percent of its active users. On Tuesday, the company sued Musk to force the acquisition.
The SEC began investigating Musk’s actions in April, when the billionaire became Twitter’s largest shareholder. In a securities document filed at the time, Musk indicated that his investment would be passive and that he did not intend to seek control of the company. But 10 days later, he launched an aggressive campaign to acquire Twitter.
The SEC questioned whether Mr. Musk was really a passive investor and whether he had disclosed his involvement at the right time. The law requires shareholders who buy more than 5 percent of a company’s shares to disclose their ownership within 10 days of reaching that threshold. In regulatory filings, Musk said he crossed that threshold on March 14, but did not make his purchases public until April 4.
The investigation is not Musk’s first brush with the SEC. In 2018, the agency charged him with securities fraud for a tweet in which he claimed he had raised funds to take Tesla, his electric vehicle company, private. Musk and Tesla settled the charges for $40 million. Under the terms of the agreement, Musk must pass his tweets through a Tesla lawyer if the messages contain material statements about the automaker.
An attorney for Musk and the SEC did not immediately respond to requests for comment.