SEC Summons Elon Musk In A Lawsuit For Hiding Twitter Stake: Interim SEC Chief Was the Only One to Oppose Suing Musk - Tesla (NASDAQ:TSLA)

The U.S. Securities and Exchange Commission (SEC) issued a summon to X owner and Tesla Inc CEO Elon Musk over potential securities law violations. The decision was made following a vote by the five commissioners of the SEC, with one reportedly dissenting vote cast by the interim SEC Chief.

What Happened: The SEC had been probing Musk since 2022 for potential securities law violations related to his delayed disclosure of Twitter, rebranded as X, share purchases before acquiring the company. Four among the five commissioners, including Republican Hester Peirce, voted in favor of suing Musk, while Republican Mark Uyeda, the current acting SEC head, voted against suing Musk. Following a 4-1 vote, the SEC filed a lawsuit against Musk on Jan. 14, as per a Reuters report on Monday.

Musk must respond to the summons in this case by April 4. He can also choose to reject it by that deadline. A process server delivered the civil summons to Musk’s SpaceX headquarters on March 14., as per CNBC.

Two sources revealed that Uyeda and Peirce disagreed with the SEC’s proposed penalty for Musk, which involved surrendering $150 million in purported unjust enrichment. Nevertheless, Peirce joined the three Democrats in voting to file the lawsuit.

According to the SEC, Musk’s delayed disclosure in April 2022—21 days after his purchase—enabled him to acquire more shares at lower prices, saving him $150 million on his Twitter acquisition.

Why It Matters: The lawsuit against Musk is tied to his acquisition of social media platform Twitter, which he later rebranded to X. Musk paid $44 billion for the acquisition. The platform’s valuation has seen a significant decline since the 2022 purchase, with Fidelity marking the value down by 72% as of December. The SEC’s lawsuit and the proposed penalty are seen as significant developments in the context of this acquisition.

When the SEC filed the lawsuit against Elon Musk in January, he criticized the SEC on X calling it a "totally broken organization" that prioritizes minor cases while overlooking numerous serious crimes that remain unpunished.

After returning to the White House, the Trump administration revoked a policy allowing the SEC's enforcement director to issue investigation orders, now requiring SEC commissioner approval, potentially slowing down investigative procedure.