The U.S. Securities and Exchange Commission confirmed on Friday that it is investigating Elon Musk’s disclosure that he owned shares in Twitter ahead of his $44 billion purchase of the company.
The SEC is looking into why Musk allegedly made his disclosure late that he owned more than 5% of the company’s shares, which he must legally disclose within 10 days of meeting the threshold.
“The SEC also wants to know why Musk filed a ’13G’ form, which is meant for passive investors, rather than a ’13D’ form that would be for activist investors (including those with interest in making a takeover offer),” Axios reported. “It’s important to note that the SEC’s letter came on the same day as Musk’s disclosure, which is before he offered to buy Twitter outright.”
The SEC said in its letter that it wants a response from Musk even if he does not believe that their “comments apply to your facts and circumstances.”
“The case is easy. It’s straightforward,” Daniel Taylor, a University of Pennsylvania accounting professor, said. “But whether they’re going to pick that battle with Elon is another question.”
A report earlier this month from The Wall Street Journal noted that a lawsuit against Musk from the SEC would likely not stop him from taking over Twitter since the company’s board of directors unanimously approved to be acquired by Musk and the SEC may lack the power to do so. Musk’s purchase of Twitter is also reportedly being reviewed by the Federal Trade Commission (FTC).
Musk said a couple of days after The Wall Street Journal’s report that he was putting the sale on hold while he investigated the number of spam accounts on the platform.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted, later adding, “Still committed to acquisition.”
Twitter has already started to making changes to its leadership following Musk’s purchase of the company.
“Kayvon Beykpour, Twitter’s general manager, is leaving and will be replaced by Jay Sullivan,” The New York Times reported. “Mr. Sullivan is currently the interim general manager of the consumer product. Bruce Falck, Twitter’s general manager for revenue, is also departing the company.”
An internal company memo from CEO Parag Agrawal obtained by The New York Times said it was “critical to have the right leaders at the right time.”