US market regulators scrutinise Elon Musk's Twitter stock purchase

They want him to explain why he did not disclose his increased stake in the company within the required 10-day time period

Elon Musk became a major Twitter stockholder following the purchase of 73.5 million shares in early April, and launched a hostile takeover bid less than two weeks later. AFP

US market authorities have asked billionaire businessman Elon Musk to explain an apparent delay in reporting his Twitter stock buys, as the Securities and Exchange Commission questions the methods and intent of his troubled bid for the San Francisco-based microblogging site.

Mr Musk, the co-founder and chief executive of electric vehicle maker Tesla, became a major Twitter stockholder following the purchase of 73.5 million shares in early April, and less than two weeks later he launched a hostile takeover bid.

He went on to sign a $44 billion deal to buy the company, but has since given mixed signals regarding how committed he is to following through.

What else could Elon Musk have bought for $44 billion?

FILE PHOTO: Elon Musk's twitter account is seen on a smartphone in front of the Twitter logo in this photo illustration taken, April 15, 2022.  REUTERS / Dado Ruvic / Illustration / File Photo

The SEC's letter to Mr Musk showed regulators asked him to explain why he did not disclose within a required 10-day time period his increased stake in Twitter, especially if he planned to buy the company.

“Your response should address, among other things, your recent public statements on the Twitter platform regarding Twitter, including statements questioning whether Twitter rigorously adheres to free speech principles,” regulators said in the letter dated April 4.

Neither Mr Musk nor the SEC responded to requests for comment.

The Tesla chief is a frequent Twitter user, regularly firing off controversial statements about issues or other public figures with remarks that are whimsical or business-focused.

He has sparred with federal securities regulators, who cracked down on his social media use after a purported effort to take Tesla private in 2018 fell apart.

Mr Musk has cited the right to freedom of speech as a driver of his efforts to undo an agreement with the SEC that tightened his use of the social media platform following his August 2018 tweet that funding was “secured” to take Tesla private.

Mr Musk also faces a lawsuit filed this week accusing him of pushing down Twitter's stock price to either give himself an escape from his buyout bid, or room to negotiate a discount.

The suit alleges Mr Musk tweeted and made statements intended to create doubt about the deal, which has roiled the social media platform for weeks.

“Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter's stock down substantially,” according to the complaint.

His aim was to gain leverage to get Twitter at a much cheaper price, or back out of the deal without suffering any penalty, the suit argued.

Updated: May 29, 2022, 7:50 AM