Elon Musk, the CEO of Tesla, has purchased a 9% interest in Twitter, making him the social media platform’s largest stakeholder, following doubts over the platform’s commitment to free expression.
The eventual goal of Musk’s 73.5 million share buy, valued at $2.9 billion at Friday’s closing price, remains unclear. However, Musk, who has 80 million Twitter followers and frequently tweets, has recently questioned Twitter’s free speech and if the network is hurting democracy.
Musk is described in the regulatory filing as a long-term investor who wants to keep his stock purchases and sales to a minimum.
He’s also considered creating his own social media network, and industry watchers are doubtful that the erratic CEO will stay out of it for long.
“We would anticipate this passive position to be the beginning of larger talks with the Twitter board/management that might eventually lead to an active stake and a potential more aggressive ownership role for Twitter,” Wedbush Securities’ Dan Ives said in a client note early Monday.
Before the opening bell on Monday, Twitter’s stock jumped 20%.
Musk informed his more than 80 million Twitter followers that he was ” seriously considering” developing his own social media site, and he has had many run-ins with financial authorities over his Twitter use.
Musk’s purchase of Twitter stock comes as he is embroiled in a contentious legal battle with US securities authorities over his right to post on the social media platform. Musk’s lawyer has argued in court that the Securities and Exchange Commission is encroaching on Musk’s First Amendment rights.
After Musk tweeted about having the money to take Tesla private for $420 per share in October 2018, Musk and Tesla agreed to pay $40 million in civil fines and have Musk’s tweets vetted by a corporate counsel.
Tesla’s stock price rose despite the fact that the cash was far from certain and the electric vehicle firm remained publicly traded. The agreement included governance improvements, including Musk’s removal as board chairman and the approval of his tweets in advance. The Securities and Exchange Commission (SEC) filed a securities fraud case against Musk, saying that his tweets were used to manipulate the stock price.
Elon Musk’s lawyer is asking the U.S. District Court judge present in Manhattan to throw out the settlement agreement asserting that the SEC is trying to harass his client and is infringing on his First Amendment rights.
Musk requested Judge Alison Nathan in early March to overturn an SEC subpoena and the settlement agreement. The SEC has used the court agreement “to stomp on Mr. Musk’s First Amendment rights and to put prior limits on his speech,” according to his lawyer, Alex Spiro.
In a court filing, the SEC stated that it has legal jurisdiction to subpoena Tesla and Musk about his tweets, and that Musk’s attempt to have the settlement thrown out is invalid.
The SEC announced that it is looking into Musk’s tweets from November 6, 2021, in which he asked followers if they thought he should sell 10% of his Tesla stock. The commission stated that it had issued administrative subpoenas as part of its investigation into Musk and Tesla’s compliance with the 2018 agreement’s disclosure controls.
The commission is also looking into whether Tesla appropriately stated its compliance with the controls in public filings with the agency.
The commission contends that the subpoenas were valid and that Musk is not challenging them in accordance with the law. Musk’s appeal was dubbed “frivolous” by SEC attorney Melissa Armstrong, who pointed out that Musk and Tesla agreed to have his tweets pre-approved by other business executives.
“Congress has provided the SEC with extensive jurisdiction to undertake investigations into suspected breaches of federal securities laws and to require production of material pertinent to such inquiries,” Armstrong wrote.
The subpoenas were issued under secrecy as a result of the commission’s official order ordering the probe. They want any written interactions about the tweets from Nov. 6 and whether or whether they were disclosed to Tesla attorneys for pre-approval.
Musk’s lawyer, Spiro, has requested oral arguments in the matter.
Musk’s disclosure regarding his Twitter stock came just two days after Tesla Inc. released its first-quarter delivery figures. Despite the fact that the corporation delivered 310,000 automobiles throughout the time, the number was somewhat lower than expected.
Musk began selling shares shortly after his November tweets regarding the Tesla stock sale, claiming on Twitter that the proceeds would be used to fulfil tax liabilities on stock options. Analysts believe that he owes $10 billion to $15 billion in taxes. However, some of the funds may have been used to purchase a share in Twitter.
He has sold almost 15 million shares worth around $16.4 billion so far. Musk is near to selling 10% of his stock after several transactions in late December.