Elon Musk thumbs his nose at the SEC again with Twitter stake

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Entrepreneur and business magnate Elon Musk gestures during a visit at the Tesla Gigafactory plant under construction, on August 13, 2021 in Gruenheide near Berlin, eastern Germany.
Patrick Pleul | AFP | Getty Images

The Securities Exchange Commission has another reason to come after Elon Musk.

The world’s richest man disclosed Monday that he’s acquired a 9.2% stake in social media company Twitter, sending Twitter shares up more than 28% as of mid-day.

The filing marks Musk’s accumulation of common shares to March 14. Musk’s stake is passive according to the financial disclosure.

The SEC mandates that anyone who acquires more than 5% of a company’s common shares disclose their holdings within 10 calendar days. Musk signed his filing 21 days after March 14.

On March 25, the day after the 10-day period lapsed, Musk posted a poll on Twitter, with the following preamble: “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”

He followed up on his own poll by stating, “The consequences of this poll will be important. Please vote carefully.”

Musk had actually already acquired his large stake in Twitter at this point — and legally had to reveal it.

SEC disclosure punishments are historically modest — often about $100,000. Musk’s net worth, according to Forbes, is about $300 billion. A $100,000 fine amounts to .00003% of Musk’s wealth. The median net worth of a U.S. household is about $122,000. An equivalent fine to a median American household would be about 3 cents.

Musk’s intentions with his large stake are unclear. In late January, conservative pundit Dinesh D’Souza, who was convicted of campaign finance fraud in 2014, tagged Musk in a tweet telling him that he “can dramatically change the political and cultural landscape” by buying and taking over “a major social media platform.”

Musk responded saying, “Interesting ideas.”

Musk vs. the SEC

The Tesla and SpaceX CEO has a history of courting controversy and promoting his companies on the Twitter platform, while dismissing some SEC rules.

In September 2018, the SEC charged Musk with making “false and misleading” statements to investors when he announced via Twitter in August that year he was considering taking Tesla private at $420 a share and had funding secured. Tesla shares seesawed for weeks after that, and the deal Musk alluded to never materialized.

Musk and Tesla eventually agreed to a settlement with the government and revised it in 2019. Under the terms of their deal, Musk and Tesla each had to pay $20 million in fines to the SEC, and Musk had to temporarily relinquish his role as chairman of the board at Tesla.

In June 2020, the SEC said Musk was likely in violation of some terms of the agreement that required the CEO to have tweets pre-approved if they contained material business information about Tesla likely to impact the stock price. Musk had tweeted that Tesla’s stock price was too high, sending the price of shares down.

Earlier this year, the SEC subpoenaed Elon Musk and Tesla after he informally polled his tens of millions of Twitter followers, asking if he should sell 10% of his Tesla holdings. The majority of his followers voted yes.

Musk’s battles with regulators tend to be public and messy, occasionally including vulgar taunts. The CEO has expressed his displeasure with the SEC on Twitter on multiple occasions, including in October 2018 when he called the agency the “shortseller enrichment commission,” and in July 2020 when he wrote: “SEC, three letter acronym, middle word is Elon’s.”

Musk hasn’t said anything publicly about his intentions regarding Twitter management or ownership since the financial filing was published. His only statement since disclosing the stake — on Twitter — was “Oh hi lol.”

Musk did not immediately respond to a request for comment from CNBC.

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