SEC asks Elon Musk for information on tweet about Twitter acquisition

Tesla CEO Elon Musk attends the opening of a Tesla factory
Patrick Pleul/Pool via AP
Tesla CEO Elon Musk attends the opening of the Tesla factory Berlin Brandenburg in Gruenheide, Germany, on March 22, 2022.

The Securities and Exchange Commission (SEC) sent a letter to billionaire Elon Musk last month asking for more information about a May tweet of his saying he “cannot move forward” with a purchase of Twitter.

The SEC letter was sent before Twitter sued Musk on Tuesday in a bid to force him to complete his purchase of the social media company, which he backed out of last week.

SEC agents are inquiring about a May 17 tweet in which Musk wrote the Twitter deal “cannot move forward” because of his concerns about how many bots are active on its platform.

According to the SEC, the tweet may have violated policies around the document that must be filed with the federal agency before the purchase of more than 5 percent of the shares of a public company.

Musk should have filed an amendment to the document if he was, in fact, suspending his purchase agreement, according to the SEC.

In a June 7 letter, Musk’s attorney Mike Ringler, with the law firm Skadden, Arps, Slate, Meagher & Flom, responded that no amendment was necessary because Musk had not changed his plans at the time.

“Despite Mr. Musk’s desire to obtain information to evaluate the potential spam and fake accounts, there was no material change to Mr. Musk’s plans and proposals regarding the proposed transaction at such time,” Ringler wrote.

CNBC first reported the news of the SEC’s letter.

Twitter’s lawsuit against Musk could force the Tesla CEO to complete the purchase agreement if the social media company prevails in Delaware Chancery Court, or they could settle on a different price for the sale or a price for his withdrawal.

Twitter engaged in months of negotiations with Musk, including over how prolific bot accounts are on the site. The social media company said fake accounts remain below 5 percent of total users and that it shared a “firehose” of data with Musk to verify its assertion.

In the lawsuit, Twitter executives accuse Musk of mounting “a public spectacle to put Twitter in play.”

“Having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the lawsuit reads.

Musk obtained a roughly 9 percent share of Twitter by early April and later that month announced his bid to purchase the company for $54.20 per share, or $44 billion.

Tags Delaware Elon Musk Elon Musk SEC Securities and Exchange Commission Twitter Twitter

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