That Elon Musk hid the purchase of Twitter shares for several days was illegal and saved him a lot of money (which he could still lose)

Last Monday we found out that Elon Musk had become the largest shareholder of Twitter… but also that actually it had been for several daysin light of the documents it filed with the US Securities and Exchange Commission (the SEC).

Now, in addition, we discover that this delay in revealing his real position in the shareholding of Twitter has violated US law and could now translate – in the worst case – into a fine of 156 million dollars for the South African tycoonas revealed by the Washington Post, echoing the opinion of “half a dozen legal and stock market experts.”

This is because since the 70s there is a law that requires investors to give notice to the SEC when they exceed a 5% stake in a listed company. Musk, who did not buy all of his shares at once, but progressively over several weeks, reached that benchmark on March 14According to the documents…

…and, up until the moment you decided to go public with that share purchase, kept buying more for three weeks, at a price of about $39/sharealmost doubling their share of the Twitter pie.

What was Musk thinking?

Alejandro Nieto, our fellow financial expert, told us on Tuesday that if Musk intended to continue increasing his percentage of the shares “he will have to pay for it”in the sense that it is inevitable that the price of them will rise because “if something interests someone, it becomes worth more”.

In fact, the announcement of Musk’s move has already sparked a 30% revaluation of Twitter shares, which are now above $50… a rise that, if Musk had announced what he was doing several days earlier, would have affected his purchase of shares, causing his acquisition of 9.2% of Twitter to affect his pocket much more.

Actually, that delay avoided losses of 156 million dollarsaccording to an estimate by David Kass, a finance professor at the University of Maryland business school.

“I really don’t know what he was thinking. Was he ignorant or fully aware that he was breaking the law? Whoever was handling his transactions should have known.”

Other experts reply to Kass: although the amount that has been saved from disbursing is millionaire, your SEC fine is likely to be only a few hundred thousand dollarsso that the move would be profitable… although there is also the theoretical possibility that it will end forcing you to give up that gain by the difference in the valuation of the shares.

A “long shot,” according to Adam Pritchard, a law professor at the University of Michigan. “The SEC would have to be really pissed at him. to try that because it’s quite possible that a court will end up rejecting that sanction,” he said.

Although it is also true that the current president of the SEC, Gary Gensler, has not characterized himself as downplaying those rules on the disclosure of shares, rather the opposite: has come to propose new rules that even reduce the time available (from ten days to five) to disclose share purchases after exceeding the 5% threshold.

And it’s also true that Musk has a long history of run-ins with the SEC.which have led him to suffer two lawsuits from it (one for fraud, and another for contempt), which in turn resulted in his resignation as president of Tesla, in the payment of a fine of 20 million dollars and in the acceptance of a series of ‘terms of use’ on how you used your Twitter account. So the SEC may not feel particularly merciful towards Musk.