The latest clash in the long history of drama between Tesla Inc (NASDAQ:TSLA) CEO Elon Musk and the U.S. Securities and Exchange Commision may soon play out over Musk's recent investment in Twitter Inc (NYSE:TWTR).
Filing Error? On Monday morning, Musk disclosed a 9.2% stake in Twitter via a 13G filing. The 13G form is meant for investors who are taking a passive stake in a company without exerting any influence over the company's business.
Following the initial filing, Twitter and its CEO Parag Agrawal announced that Musk has been appointed to Twitter's board of directors, suggesting Musk's role with Twitter will be far from passive. Musk subsequently re-filed the disclosure of his ownership stake on form 13D on Tuesday to reflect his status as an active investor. The updated filing also disclosed 371,900 fewer shares in his Twitter stake than the original filing indicated. Musk later tweeted that the "initial share number filed was incorrect."
Related Link: Does Elon Musk's Investment Make Twitter A Serious Buyout Candidate?
On Thursday, Seabreeze Partners Management's Doug Kass tweeted that Musk's initial filing could leave him exposed to potential action by the SEC.
"Harvey Pitt, former SEC Commissioner, says Musk's 13G filing was erroneous and he likely violated the law — he says it is possible that the SEC will go after him," Kass tweeted.
Fox Business' Charles Gasparino tweeted Thursday that Musk's initial filing may have been a deliberate provocation of the SEC.
"My guess and the guess of experts I spoke to [is] he did it on purpose. He’s daring @SECGov to come after him w a chump change $1 million fine," Gasparino said.
Representatives from Tesla and Twitter did not immediately respond to Benzinga's request for comment on Thursday. A representative from the SEC declined to comment on the matter.
Musk Vs. The SEC: Musk has a long history of conflict with the SEC. In 2018, Musk agreed to pay $40 million in penalties as part of a fraud settlement related to a tweet in which he claimed he had "funding secured" for a Tesla buyout at a price of $420 per share, a tweet the SEC found to be "false and misleading" and that caused "significant market disruption."
In June 2020, the SEC found Musk to be in violation of the terms of his fraud settlement, which also required him to have any tweets containing material business information preapproved by Tesla. At the time, Musk had tweeted, "Tesla stock price is too high imo," which caused a sell-off in Tesla shares.
Earlier in 2022, the SEC subpoenaed Musk and Tesla related to a Twitter poll Musk conducted asking followers whether or not he should sell 10% of his Tesla holdings.
"I have no respect for the SEC," Musk famously told "60 Minutes" in 2018. Musk has subsequently taunted the SEC and repeatedly referred to the regulator on Twitter as the "Shortseller Enrichment Commission."
"SEC, three letter acronym, middle word is Elon’s," Musk said in July 2020.
Shares of Twitter lost 5.38% Thursday amid the controversy. Tesla shares gained 1.1%.
Benzinga's Take: Musk's repeated defiance and taunting of the SEC and other regulators and lawmakers to the point where he is publicly suggesting they fellate him doesn't do much to combat the common belief that U.S. regulations and laws don't apply equally to the wealthiest segment of the population.
As Gasparino suggests, even if the SEC slaps another $1-million fine on Musk for his latest violation, it likely wouldn't do anything meaningful to deter Musk from continuing his behavior in the future given he is worth an estimated $276 billion.
Photo courtesy of Tesla.
