Elon Musk caused a sensation late last month after it was announced that his offer to purchase Twitter had been accepted. However, it appears that the billionaire is now facing scrutiny from regulators.
A report published by the Wall Street Journal on Wednesday claims the Securities and Exchange Commission (SEC) is looking into whether Musk properly disclosed one of his stock purchases.
The report says the stock purchase was not disclosed on time
At issue is a requirement that investors submit a filing when they purchase more than 5% of a publicly-traded company’s voting class shares.
This rule is to provide other investors with a heads-up when a particular stockholder is attempting to gain influence over a corporation or take control of it entirely.
According to an earlier Journal report, Musk exceeded the 5% ownership threshold in Twitter on March 14 and was thus required to have submitted a filing on March 24. However, he waited until April 4 to do so.
Meanwhile, Wednesday cites anonymous sources said to be familiar with the case as saying that SEC are interested in why Musk took an additional 10 days to disclose his stock purchase.
SEC may attempt to have Musk fined
Both SEC officials and Musks’ attorney refuse to provide the Journal with a comment, but University of Pennsylvania accounting professor Daniel Taylor said the billionaire may have slow-walked his disclosure in order to reduce costs.
He indicated that Musk likely saved more than $143 million by purchasing more Twitter stock before public attention drove up its price.
The Journal stated that there is a possibility that the SEC may file a lawsuit against Musk and seek a fine of up to $43,792 per day.
However, it is also possible that the SEC will drop its investigation of Musk. What’s more, the Journal noted that even if the agency does bring a civil suit then it is still unlikely to affect Musk’s takeover deal.
Taylor agreed that is far from clear as to whether the SEC will take action, saying, “The case is easy. It’s straightforward. But whether they’re going to pick that battle with Elon is another question.”