Posted by Oh boy, will this ever end.
In Twitter’s Securities and Exchange Commission filings, here’s a letter from the SEC to Elon Musk, dated April 4 but only made public last week. We have talked a number of times about the facts that:
- When Musk was buying Twitter stock earlier this year, he was required to file a form, Schedule 13D, disclosing that he had bought more than 5% of the stock. He filed this form 11 days late, and kept buying stock in the interim; when he ultimately filed the form the stock shot up. So he saved himself something like $140 million by ignoring the law while he bought stock.
- When he did disclose his stake, he filed the wrong form — a Schedule 13G — which can only be used by passive investors; he checked a box saying that he had no plans to change the control of Twitter. Meanwhile he was already having conversations with Twitter about getting a board seat and/or taking Twitter private, so his public claims about being passive were not true. This probably didn’t save him any money personally, but it was misleading to investors who were trying to figure out what was going on.
The SEC did notice this stuff, and on April 4 they sent Musk a letter asking some simple questions like:
Please advise us why the Schedule 13G does not appear to have been made within the required 10 days from the date of acquisition as required by Rule 13d-1(c), the rule upon which you represented that you relied to make the submission. …
With limited exception, a beneficial owner may not rely upon Rule 13d-1(c) to file a Schedule 13G in lieu of Schedule 13D if that person has acquired the securities with any purpose, or with the effect, of changing or influencing the control of the issuer. See Rule 13d-1(c)(1) of Regulation 13D-G. Please provide us with a brief analysis of the bases upon which you determined that you were eligible to rely upon Rule 13d-1(c) to make the filing on Schedule 13G. Your response should address, among other things, your recent public statements on the Twitter platform regarding Twitter (the issuer), including statements questioning whether Twitter (the issuer) “rigorously adheres to” “free speech principles.”
Musk’s response is not yet public, but there’s not much he can really say. I guess this is the first salvo in a very annoying war in which the SEC tentatively seeks mild penalties from Musk and Musk responds intemperately about how the SEC is evil and trying to oppress him.
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