Back when Elon Musk was in the process of buying a larger controlling stake in Twitter via shares, he was required to disclose to the SEC once he crossed the 5% ownership threshold. However, Musk failed to do so and missed the deadline by 11 days. But now it looks like Musk and the SEC have finally reached a settlement over Twitter.
Musk reaches settlement with SEC over Twitter
According to a report from Reuters, Musk and the SEC have agreed on a $1.5 million settlement over Twitter. However, despite agreeing to settle, US District Judge Sparkle Sooknanan in Washington, D.C.raised some concerns, namely whether the SEC would allow other violators to get away with similar “small” penalties.
According to Sooknanan, “The court is left to wonder whether the SEC will afford other alleged securities-law violators such solicitude. Or is this a one-time deal designed for Mr. Musk negotiated without the involvement of the SEC lawyers litigating this case?” Also, this settlement means that Musk does not have to admit any wrongdoing.
What happened?
For those unfamiliar, under the SEC’s regulations, investors who acquire 5% ownership in a company via shares have to make a disclosure to the agency. Back then, investors had a 10-day grace period to make the disclosure. However, Musk missed the deadline by 11 days. The SEC at that time claimed that by doing so, it allowed Musk to save as much as $150 million.
Prior to the announcement of his plans to acquire Twitter, Musk was steadily buying more controlling shares in the company. If he had made his disclosure according to the SEC’s rules, there’s a chance it could have affected the share’s price. It could have potentially cost Musk more.
However, Musk said his failure to disclose was inadvertent. He eventually went on to acquire Twitter for a whopping $44 billion. Some are calling this $1.5 million settlement more symbolic than penalizing. When you take Musk’s wealth into consideration, $1.5 million is a drop in the bucket. It also means that he paid one cent on the dollar compared to the $150 million.
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