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José A. González
Miércoles, 15 de enero 2025, 10:15
The United States Securities and Exchange Commission (SEC) is once again scrutinizing the business dealings and movements of billionaire Elon Musk, now a close ally of Donald Trump. A few years ago, the South African-born magnate agreed to a fine for a securities fraud accusation after claiming in several tweets that he had the necessary funding to take Tesla private. Now, the focus is on his latest acquisition, Twitter, now rebranded as X.
According to the regulator, Musk violated securities market laws during the acquisition process of the social network, then known as the blue bird. The SEC claims that the entrepreneur failed to disclose within the required timeframe that he had taken a significant stake in the company's capital, on which he later launched a $44 billion buyout offer.
The complaint, spanning 11 pages, reveals that the founder of Tesla and Space X "had taken a significant stake in Twitter," a move that allowed him "to continue buying shares at artificially low prices." According to SEC calculations, this meant he "underpaid by at least $150 million for shares he bought after the deadline to disclose his stake had passed."
Musk crossed the 5% ownership threshold on March 14, 2022, and should have disclosed it within 10 calendar days, by March 24. However, the disclosure of his stake was not made until April 4, 2022, 11 days after the deadline.
On April 4, 2022, 11 days after the deadline to report, Musk finally publicly revealed his stake in a communication to the SEC, disclosing that he had acquired more than 9% of Twitter's outstanding shares," the lawsuit states. "That day, Twitter's stock price rose more than 27% compared to the previous day's closing price," adds the argument of the U.S. stock market regulator's lawsuit.
In its investigation, initiated the same year as the purchase, the SEC maintains that during the period when Musk illegally concealed his stake, he invested more than $500 million in additional Twitter shares. "Because Musk did not timely disclose his beneficial ownership, he was able to make these purchases from an unsuspecting public at artificially low prices, which did not yet reflect the relevant undisclosed information about Musk's significant stake of more than 5% of Twitter's shares and the purpose of the investment," the text states.
Elon Musk completed the purchase of his favorite toy in October 2022, an acquisition that took longer than expected. First, there were messages on the platform itself, then came the official communications. These were made public in March.
In that month, specifically on March 14, 2022, a stockbroker on behalf of Elon Musk bought 2.8 million Twitter shares, surpassing the 5% threshold on the social platform and, therefore, had to notify regulatory authorities. But the SEC's investigation reveals that the purchases began much earlier.
The first acquisitions of Twitter securities date back to January 31. By the end of February, the broker repeatedly suggested to Musk's wealth manager that he seek legal advice regarding his obligations to publicly disclose his holdings if he exceeded 5% of the capital. In fact, the magnate's manager, according to the lawsuit, received a communication from the stockbroker asking if he wanted to continue taking positions in the company, then led by Jack Dorsey.
Before disclosing the threshold breach, the investigation recounts, Musk spoke with Twitter board members and continued buying shares without having informed the market of his stake. Twitter offered him a seat on the board, and the magnate initially accepted, only to later retract. On April 4, he announced he already held 9.2% of the capital. On April 13 of that year, Musk announced an offer to acquire the company, and on April 25, he signed an agreement to take 100% for about $44 billion. The regulator concludes that shareholders who sold their shares during the period when the billionaire failed to declare his holdings were disadvantaged.
The SEC requests a jury trial and seeks to have Musk ordered to disgorge his unjust enrichment resulting from his violation, along with applicable interest and an additional fine.
The lawsuit comes after nearly three years of investigation and just days before Donald Trump's arrival at the White House. Additionally, in less than a week, Gary Gensler, the current SEC chairman, will step down to be replaced by Paul Atkins, chosen by Trump himself. Musk is currently one of the closest allies to the president-elect and was the main donor to his election campaign. It remains to be seen whether the new head of the supervisory body will maintain the lawsuit or withdraw it.
Twitter was one of Elon Musk's latest purchases, but it does not seem to be his last foray into social platforms. In recent hours, rumors of a TikTok acquisition by the South African billionaire are gaining traction in the United States.
According to Android Authority, the Chinese government is evaluating the sale of TikTok to X as part of its strategy to protect sensitive data.
This Sunday, January 19, the popular short vertical video social network, with over 170 million active users in the United States, will have to shut down in the North American country if it does not comply with federal data protection and security regulations.
ByteDance, the Chinese company that owns the platform, faces the disappearance of its application from major virtual stores (App Store and Google Play). However, Chinese authorities are working on transferring operations in the United States to avoid losing control of one of today's lucrative businesses.
Beijing has set its sights on Elon Musk as a strategic ally to maintain control over TikTok. Musk has maintained a good relationship with the Asian giant since 2020, when he obtained all necessary permits from the Chinese government to launch Tesla's giant factory in Shanghai.
Since then, state banks have lent money to Tesla at low interest rates, and the Beijing executive helped change ownership rules to allow the American company to establish itself in the country. Since then, the Shanghai factory has replaced Tesla's Fremont, California plant as the largest and most productive, accounting for more than half of the company's global deliveries and most of its profits.
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