The rumors about the SEC investigation of Elon Musk are growing. And, curiously, in this case, it would not be for the announcement of the total purchase of Twitter or the halt in the payment of this purchase.
We recall that in recent days, Musk has had an acrimonious discussion with some of the directors of the social network, which has concluded in an announcement via Twitter of the suspension of the agreed payment of 44,000 million dollars.
Neither the announcement of the purchase nor the announcement of the standstill
Oddly enough, it is not the announcement of the purchase of Twitter, made on the social network itself last April, nor the recent information, again on Twitter, of the halt of the payment, which is why the billionaire founder of Tesla could be in the eye of the SEC.
It should be remembered that, although Musk did not previously formally announce his intention to acquire Twitter to the Securities and Exchange Commission, by doing so through the social network itself, he took advantage of the fact that the SEC has accepted since 2013 that this way of communicating can be a legal way of giving notice of his intentions regarding the shareholding.
While it may be a means of circumventing the rules somehow, it could not be prosecuted if it is within the law. However, it is not uncommon for Musk to run afoul of the SEC or make personal interpretations of the rules.
The closest example would be the first stock purchase he made on Twitter. We recall that he had acquired almost 10% of the shares before the purchase of the entire social network. However, there was no legal disclosure of that fact in that case.
In the United States, when 5% or more of a company is acquired, it is necessary to communicate that the purchase has been made. These announcements are made for several reasons: the two main ones are to warn other investors of shareholder movements and announce to the markets that such purchases may affect the value of the share.
What happened to the purchase of 10% of Twitter?
The explanation is simple: it took the billionaire at least 21 days to disclose that he had acquired almost 10% of Twitter’s shares. That had a major effect on the value of those shares. The value rose significantly.
According to some analysts, if the disclosure had been made within the legal 10-day period, it would have cost the Tesla founder considerably more effort (and money) for the 15 million shares he bought outside the ten days.
Although not everyone agrees, delaying the declaration by 11 days could have saved more than 140 million dollars. According to some analysts, even more.
While it is possible that this investigation could go ahead, and even with a negative outcome for Musk, it is unlikely to have a major financial impact. Even if it were to result in a fine of millions of dollars, the value of the savings could exceed the fine.