Elon Musk Bids to Buy Twitter: Live News, Reactions and Updates

Credit…Andrew Kelly/Reuters

Elon Musk’s unusual entanglement with Twitter — which he now wants to buy — has caught the attention of not only Silicon Valley and the social media world, but also some securities lawyers.

Even before Mr. Musk announced on Thursday morning that he had offered to buy Twitter for about $43 billion, his accumulation last month of a large block of shares in the social media company attracted public attention. attention of a law firm that is suing the billionaire.

On Tuesday, law firm Block & Leviton filed a federal lawsuit against Mr. Musk on behalf of several Twitter shareholders they say suffered losses as the Tesla chief executive built a stake of more than 9% in Twitter. The lawsuit seeks class-action status and argues that Twitter investors who sold shares late last month may have lost potential gains because Mr. Musk did not promptly disclose his large stake.

The civil complaint noted that Mr Musk revealed he had amassed a 9% stake in Twitter – making him the company’s largest shareholder – on April 4, even though he had started building his stake much higher. early. When Mr. Musk finally disclosed his stake in Twitter, the company’s stock price jumped from $39.31 to $49.97. The lawsuit argues that Mr. Musk should have disclosed in a regulatory filing by March 24 that he acquired a 5% stake in Twitter.

The Securities and Exchange Commission requires investors to publicly disclose that they have taken a 5% or more stake in a company within 10 days of acquiring the shares – a rule primarily intended to force investment managers like hedge funds to disclose their actions in the market.

The lawsuit said that by not making the required filing within that time, Mr. Musk saved money by buying Twitter shares at a cheaper price. And it deprived investors who sold shares before the disclosure of the chance to benefit from the price gain.

Ever since Mr. Musk took to his big financial position on Twitter, Wall Street and securities lawyers have speculated that the SEC may determine whether the billionaire violated securities laws by failing to promptly disclose his stake. .

If the SEC were to investigate the late disclosure, it would likely have to determine whether Mr. Musk intended to violate the 5% filing rule or was an error or inadvertent oversight.

The SEC declined to comment. A lawyer for Mr. Musk was not immediately available for comment.

Dennis Kelleher of Better Markets, a corporate and regulatory transparency watchdog, said regulators have an obligation to look at disclosure to send a message that all investors are being treated as same way.

“The rule of law crumbles if billionaires play by a different set of rules,” he said.

In February, the SEC proposed to halve the time period within which investors must publicly disclose taking a 5% stake in a company from the current 10 days to five.

Robert Jackson Jr., a former SEC commissioner and now a New York University law school professor, said Musk’s apparent delay in disclosure may be relevant to the Williams Act – a five-decade-old law that established ground rules for takeover attempts deemed unsolicited or hostile.

“The Williams Act was designed to protect investors in exactly this situation – where an acquirer secretly buys shares which they then use as a starting point to launch a company-wide bid,” Mr. Jackson, co-director of NYU’s Institute for Corporate Governance. and Finance. “If this isn’t a case that raises concerns under the Williams Act, it’s hard to know what would be.”

Mr Musk’s Twitter takeover bid comes just weeks after he launched an effort to end a four-year deal with the SEC that required his Twitter posts to be reviewed for potential information. on the market by officials from Tesla – the electric car company it runs. The settlement with the SEC resulted from a Twitter message Mr. Musk posted about planned financing to take Tesla private when, in fact, he did not have the financing in hand.

Since then, Mr. Musk has been frustrated with the settlement and the need to revise his Twitter posts. In a court filing, Mr. Musk’s lawyer said the ongoing terms of the settlement amounted to an “unconstitutional restriction on Mr. Musk’s speech”.

Ephrat Livni contributed report.

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