Just days after an investor lawsuit was filed against Elon Musk, alleging that he manipulated shares of Twitter lower in the midst of his proposed takeover bid for the company, it has been reported that the SEC is also asking questions about Musk's disclosures related to his Twitter stake.
On Friday morning Reuters reported that the "U.S. Securities and Exchange Commission is looking into Tesla Chief Executive Officer Elon Musk's disclosure of his stake in Twitter". Similar headlines crossed the Bloomberg terminal before market open on Friday:
U.S. SEC, IN A LETTER DATED APRIL 4, QUESTIONS ELON R. MUSK ON 13G TWITTER FILING
SEC'S NICHOLAS P. PANOS IN LETTER TO MUSK, QUESTIONS WHY SCHEDULE 13G DOES NOT APPEAR TO HAVE BEEN MADE WITHIN REQUIRED 10 DAYS FROM DATE OF ACQUISITION
Recall, just days ago we reported that investors were also going after the timeliness of Musk's disclosures related to his stake in Twitter. It alleged that Musk "manipulated the company's stock price downward" during the course of his involvement in the company.
Investors are alleging that Musk saved himself $156 million by not reporting, in a timely fashion, that he had purchased more than 5% of Twitter by March 14, a new report from Bloomberg/Yahoo says.
The investors also asked to be certified as a class and to be awarded both punitive and compensatory damages. In addition to Musk, Twitter was also named as a defendant, as investor agued that the company didn't do enough to look into Musk's conduct.
The suit alleges his conduct was to "drive Twitter’s stock down substantially in order to create leverage.”
“Musk’s market manipulation worked. Twitter has lost $8 billion in valuation since the buyout was announced,” the lawsuit reads, according to a follow up writeup by Bloomberg Law.
The suit alleges that Musk continued to buy stock after not disclosing his stake, amassing a 9.2% stake.
"By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price," the lawsuit says. It also claims that Tesla's drop has hampered Musk's ability to consummate the transaction.
The lawsuit alleges that Musk's Tweets about Twitter – namely allegations that the company had too many spam bots and the resultant decision to put the buyout "temporarily on hold" – also were an attempt to drive the share price lower.
Musk's motive may have been to stave off a margin call, the report notes:
This story is developing. We will update this piece as more information becomes available…