The US Securities and Exchange Commission (SEC) is intensifying its efforts to secure testimony from Elon Musk as part of its investigation into the billionaire’s purchases of Twitter (now X) shares, which preceded his takeover of the social media platform.
In a recent development, the Wall Street regulator revealed that Musk had failed to comply with their previous request to testify last month and is now seeking a court order to compel him to do so. The SEC’s inquiry revolves around scrutinizing Musk’s statements and disclosures related to these stock transactions, as outlined in a filing submitted to a federal court in San Francisco.
The SEC’s investigation into Musk’s Twitter acquisitions was initiated back in April 2022 and has involved the collection of thousands of documents from Musk and other involved parties. According to the filing, Musk has already provided hundreds of documents and testified twice in July 2022, marking an ongoing, nonpublic investigation.
Alex Spiro, an attorney representing Musk, expressed frustration with the SEC’s persistent demands, stating, “The SEC has already taken Mr. Musk’s testimony multiple times in this misguided investigation – enough is enough.”
Last month, Musk had initially agreed to be interviewed by the SEC. However, just two days before the scheduled meeting on September 15, Musk raised several objections, including his contention that San Francisco was not the appropriate location for the interview. Investigators subsequently proposed alternative dates and offered to relocate the interview to Fort Worth, Texas, near Musk’s current residence. Despite these accommodations, Musk ultimately refused to participate, as stated in the filing.
The SEC’s decision to seek enforcement of a subpoena is a rare move, but it often garners support from the courts, according to Marc Fagel, a lecturer at Stanford Law School and former SEC official in San Francisco. Fagel noted, “For the SEC to come out of the woodwork and make it public that they’re investigating, that’s a big step.”
Prior to fully acquiring Twitter, Musk initially acquired a 9.2% stake in the social media company in March 2022. He subsequently disclosed this significant stake to the SEC in April, in accordance with the agency’s rules, which require individuals acquiring more than 5% of a public company to disclose their holdings within 10 days.
As Musk expanded his Twitter holdings, the SEC had sent him inquiries in April 2022 concerning how he disclosed his substantial stake. These inquiries primarily focused on the required filing that investors must submit when amassing more than 5% of a company.
In July, Democratic Senator Elizabeth Warren called on the SEC to probe into possible violations of securities laws by Tesla and its board of directors concerning Musk’s actions. In a nine-page letter to SEC Chair Gary Gensler, Warren aired concerns over Musk’s Twitter takeover, highlighting potential “conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders.”
Musk, currently the world’s wealthiest individual, oversees a portfolio of six companies, including Tesla Inc., Twitter Inc., and SpaceX, which is a major government contractor. Throughout the years, he has frequently clashed with the SEC, even dubbing it the “Shortseller Enrichment Commission” in October 2018. In that same year, Musk reached a settlement with the SEC, agreeing to pay a $20 million fine, relinquish his role as chairman at Tesla, and subject any future tweets about the company to internal oversight, following an investigation into his remarks about taking Tesla private.
The SEC has also been investigating Musk’s role in shaping Tesla Inc.’s claims regarding self-driving cars, examining whether Musk may have improperly made forward-looking statements, as reported by Bloomberg News in January.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
