Elon Musk‘s late disclosure of his large investment in Twitter last month is now being investigated by federal officials. This lateness created a lag, allowing him to purchase more stock that too without notifying other stockholders. According to the sources, the Securities and Exchange Commission is looking into the late filing of a public form by Musk. This is a form that investors must fill out when buying more than 5% of a company’s stock.
The disclosure serves as an early warning to shareholders and corporations. This happens when a major investor may be attempting to gain control or influence over a firm. Musk filed his paperwork on April 4, more than ten days after his share crossed the threshold for disclosure. However, Elon has not yet publicly said why he failed to file on time.
Related: Why Elon Musk Is Under Federal Investigation?
Elon Musk Saves A Fortune By Not Reporting Earlier
By not revealing that his trades had surpassed the 5% threshold, Elon has likely saved moreover $143 million. Daniel Taylor, an accounting professor at the University of Pennsylvania, agrees to the same.
According to Daniel, the stock price may have been higher if the market had been aware of Elon’s increasing shareholding. Investors who cross that boundary must file a form with the SEC within 10 days indicating their investment. But according to securities filings, Musk’s shares surpassed 5% on March 14.
According to SEC guidelines, he should have reported his investment by March 24. Alas, he simply did not do so! Elon bought $513 million worth of shares between $38.20 and $40.31 per share after March 24.
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Taking Formal Actions Against Musk: Can SEC Do It Or Not?
Because not every inquiry leads to formal action, the SEC might end its investigation without filing civil claims. A complaint filed by the SEC against Musk is unlikely to jeopardize the Twitter transaction. This is because the company’s board of directors has approved it, and the SEC does not have the authority to block mergers or take-private deals in general.
Regulators may seek a court injunction to prohibit Elon from voting his shares. This is because he got it without properly disclosing it. However, the SEC has not pursued such kind of remedy until now. If the FTC finds that the law has been broken, it can even pursue fines of up to $43,792 per day.
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