"Frenemies" Musk and US Securities Regulators Likely to Clash Again Over Twitter Disclosure Rule Violations

Elon Musk, CEO of Tesla [Photo by AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Elon Musk, CEO of Tesla, is set to clash once again with the U.S. Securities and Exchange Commission (SEC) over violations of disclosure rules related to his acquisition of Twitter shares, following previous conflicts regarding social networking services (SNS).

On the 5th (local time), The Wall Street Journal (WSJ) reported that Musk secured approximately 73.5 million Twitter shares (a 9.2% stake) on the 14th of last month and was required to disclose this within ten days. However, he only made the disclosure on the 4th of this month, well past the deadline.

Legal experts pointed out that this violation of regulations could work against Musk in his recent lawsuit to terminate the agreement with the SEC. This refers to the agreement made after Musk tweeted about considering taking Tesla private. Subsequently, Musk initiated the termination of the agreement, claiming that the SEC was abusing its SNS policies to continuously investigate his statements.

David Rosenfeld, a former SEC attorney, stated, "Claiming that the SEC is harassing him without cause and then violating a fairly simple (disclosure) rule will certainly not help Musk persuade the judge to terminate the agreement."

WSJ noted that the SEC could investigate Musk’s disclosure on the 4th, in which he described himself as a "passive investor" regarding his Twitter stake acquisition. At the time of disclosure, Musk provided no substantial basis for this claim, stating he had no intention to engage in management. However, on the same day, he was appointed to Twitter’s board of directors, changing his status to an "active investor" in a revised disclosure just one day later.

Earlier, Musk had tweeted his dissatisfaction with Twitter’s failure to properly uphold the principle of freedom of expression and even revealed that he was seriously considering creating a new social media platform. At that time, Musk had already acquired a 9.2% stake in Twitter, becoming its largest shareholder.

WSJ pointed out that Musk’s actions resemble those of activist investors who exert influence over specific companies.

Howard Birkenblit, an attorney at the law firm Sullivan & Worcester, observed that while Musk’s tweets do not explicitly indicate plans to influence Twitter’s management, regulators could investigate such tweets.

This content was produced with the assistance of AI translation services.