SEC Says Its Case Against Musk Is Beyond Dispute

Tesla CEO Elon Musk during a cabinet meeting at the White House in April. (Shawn Thew/EPA/Bloomberg)

The government’s securities regulator says it has an open and shut case against Elon Musk, alleging that Twitter shareholders missed out on gains because he filed stock ownership notices late in 2022.

In filings Friday morning, the U.S. Securities and Exchange Commission asked a federal-district court judge for a summary judgment that finds Musk liable without a trial, with penalties to follow.

“This case involves a straightforward, strict liability violation of important public reporting requirements under the federal securities laws,” says the SEC in its court memo. It says that by March 14, 2022, Musk had acquired more than 5% of Twitter stock, which the law required him to disclose in a 13D filing by March 24. He didn’t do so until April 4. “There is no credible dispute as to these facts,” the agency says.

The SEC filed the case against Musk in the last days of Joe Biden’s presidency in January. It is continuing under the administration of Donald Trump, even though the SEC has dropped many Biden-era cases.

The complaint alleges that Musk bought $500 million worth of Twitter stock in the 11 days he was late in disclosing his stake in the social-media platform, which he ultimately bought for $44 billion and renamed X.

When Musk did make the April 4 disclosure, Twitter stock jumped from $39 to $54, so the agency says Twitter shareholders who unknowingly sold to him during the delay missed out on gains worth $150 million.

The 13D rules are strict liability, and therefore the SEC told Judge Sparkle L. Sooknanan of the U.S. District Court for the District of Columbia that the facts behind Musk’s late filing don’t matter. The judge should just go right to the penalty phase of the case, said the agency filing, which would include disgorgement of his allegedly ill-gotten gains.

Even if the SEC wins a judgment and recoveries on the order of $150 million, the Twitter case won’t likely be a big deal to Musk or investors in Tesla .

“They spend their time on s—- like this when there are so many actual crimes that go unpunished,” Musk said on X in January in response to the SEC’s suit.

Musk, his attorneys didn’t immediately respond to Barron’s queries about the agency’s motion to decide the case. The SEC declined to comment.

It’s unlikely that Musk’s team will concede the game. Thursday, his lawyers asked the court to transfer the case to Austin, Texas, arguing that a trial will require testimony by people there who include Musk’s family officer manager Jared Birchall. In his motion to dismiss a shareholder suit over the Twitter 13D filings, Musk said that “all indications” show his filing delay was an innocent mistake.

Write to Bill Alpert at william.alpert@barrons.com