Elon Musk under investigation over Twitter takeover deal conduct, court filing shows

SEC has questioned Tesla's chief executive's comments about the acquisition and a 9% stake he built up before announcing his bid

Elon Musk disclosed on April 4 that he had acquired more than 9 per cent of Twitter, a week later than regulations allow. He also did so using a filing typically reserved for passive investors. AP
Beta V.1.0 - Powered by automated translation

Elon Musk is being investigated by federal authorities over his conduct in his proposed $44 billion takeover of Twitter, the social media company said in a court filing released on Thursday.

The filing did not reveal what the exact focus of the investigations was and which federal authorities were conducting them.

Twitter, which sued Mr Musk in July to force him to close the deal, said lawyers for the Tesla chief executive had claimed “investigative privilege” when they refused to hand over documents it had sought.

In late September, Mr Musk's lawyers provided a “privilege log” identifying documents to be withheld, Twitter said. The log referenced drafts of a May 13 email to the US Securities and Exchange Commission and a slide presentation to the Federal Trade Commission.

“This game of 'hide the ball' must end,” the microblogging platform said in the court filing.

The court filing, which asked Delaware judge Kathaleen McCormick to order Mr Musk's lawyers to provide the documents, was made on October 6 — the same day that Ms McCormick paused litigation between the two sides after Mr Musk reversed course and said he would proceed with the deal.

Alex Spiro, one of Mr Musk's lawyers, told Reuters that Twitter's court filing was a “misdirection”.

“It is Twitter's executives that are under federal investigation,” he said.

Twitter declined to comment on Mr Spiro's statement. It also declined to comment when Reuters asked about its understanding of any investigation into Mr Musk.

The SEC did not immediately respond to a request for comment and the FTC declined to comment.

The SEC has questioned Mr Musk's comments about his proposed acquisition of Twitter, including whether a 9 per cent stake he had built up before announcing his bid had been disclosed late and why it indicated that he intended to be a passive shareholder.

Mr Musk later refiled the disclosure to indicate he was an active investor.

In June, the SEC asked Mr Musk in a letter whether he should have amended his public filing to reflect his intention to suspend or abandon the deal.

The Information, a technology news site, reported in April that the FTC was scrutinising whether Mr Musk failed to comply with the antitrust reporting requirement relating to an investor's intentions of being a passive or active shareholder.

However, Twitter said in June that the takeover deal with Mr Musk had cleared an antitrust waiting period for review by the FTC and US Justice Department.

Ms McCormick gave Mr Musk until October 28 to close the acquisition. If the deal is not closed by then, a trial date will be set for November.

Updated: October 14, 2022, 4:53 AM
NEWSLETTERS
MORE FROM THE NATIONAL