Tesla Inc TSLA CEO Elon Musk may face more regulatory scrutiny for missing a key disclosure deadline and filing incorrect paperwork when he bought a 9.2% stake in Twitter Inc TWTR, according to a Reuters analysis.
What Happened: Musk on Monday revealed his stake estimated to be worth $2.8 billion, making him the social media firm's largest shareholder.
U.S. Securities and Exchange filings noted March 14 as the date of the event. SEC law requires disclosures to be filed within ten days of buying a stake of over 5%. Musk’s revelation was way past the March 24 deadline.
The Reuters report also cites Eleazer Klein, co-chair of the global Shareholder Activism Group at Schulte Roth & Zabel, as saying Musk’s use of a “13G” filing for the disclosure “was not appropriate.”
The 13G disclosure form is for investors who plan to hold the shares passively. A day after the disclosure, it was announced that Musk will take a Twitter board seat in order to push for change at the company.
The right form for such disclosures is “13D,” extensively used by activist investors, officers, and directors.
Emails sent to Twitter and Tesla for comment did not elicit a response at press time.
Why It Matters: Musk is already under SEC scrutiny for a Twitter poll from November 2021 asking his followers whether he should sell 10% of his Tesla stake. The world’s richest man is also bound by a 2018 agreement to get permission in advance if he wished to tweet certain posts.
Musk in August 2018 sent out a controversial tweet that said he was considering taking the electric vehicle maker private for $420 per share.
His tweet that said “funding secured” led to the stock reversing course and turning volatile.
Price Action: Twitter stock closed 2% higher at $50.9 a share on Tuesday, as per BenzingaPro.
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