Elon Musk’s SEC woes: US agency to investigate X’s acquisition, force Musk to testify

The US Securities and Exchange Commission (SEC) is seeking to force Elon Musk to testify as part of its investigation into his purchases of Twitter Inc. shares before his takeover of the social media platform, now known as X. The SEC accused Musk of failing to appear for testimony when requested and has now asked a judge to force him to testify. The agency is scrutinizing Musk’s statements and disclosures regarding the stock transactions. The SEC initiated its probe in April 2022 and has requested thousands of documents from Musk and other parties, according to the agency’s filing. Musk has already provided hundreds of documents and testified twice in July 2022, as described in the filing, which portrays an ongoing, nonpublic investigation. In response to these developments, Alex Spiro, an attorney for Musk, stated, “The SEC has already taken Mr. Musk’s testimony multiple times in this misguided investigation - enough is enough.” While Musk initially agreed to an interview with the SEC last month, he later raised objections, including concerns about the interview location in San Francisco. The SEC proposed new dates and a change of location to Fort Worth, Texas, near Musk’s current residence, but Musk subsequently refused to meet for the interview, as detailed in the filing. The SEC’s move to enforce a subpoena is relatively rare, but when it occurs, the courts often side with the regulator. Marc Fagel, a lecturer at Stanford Law School and a former SEC official in San Francisco, noted the significance of the SEC making the investigation public. Before fully acquiring X, Musk purchased a 9.2 per cent stake in the social media company in March 2022 and disclosed it to the SEC in April. The SEC’s regulations mandate that individuals who acquire more than 5 per cent of a public company must disclose it within 10 days. As Musk was increasing his holdings in X, the SEC sent him a query in April 2022 regarding how he disclosed his substantial stake. The SEC’s inquiry, which came from the mergers and acquisitions office, focused on the form investors must file when accumulating more than 5 per cent of a company. Elon Musk, the world’s richest person, currently oversees multiple companies, including Tesla Inc., X Corp., and SpaceX, a major government contractor. Over the years, he has been involved in several conflicts with the securities regulator, which he once referred to as the “Shortseller Enrichment Commission” in 2018. In the same year, he agreed to pay a $20 million fine, relinquished his chairmanship at Tesla, and committed to clearing future tweets about the company with an internal monitor, following an SEC investigation into his comments about taking the company private. The SEC has also been investigating Musk’s role in shaping Tesla Inc.’s claims about self-driving cars. SEC officials are assessing whether Musk may have inappropriately made forward-looking statements in this regard, according to Bloomberg News reports.