SEC steps up scrutiny over Musk comments on $44 bln Twitter deal

By Reuters   July 14, 2022 | 06:57 pm PT
SEC steps up scrutiny over Musk comments on $44 bln Twitter deal
Tesla CEO Elon Musk leaves Manhattan federal court after a hearing on his fraud settlement with the Securities and Exchange Commission (SEC) in New York City, U.S. April 4, 2019. Photo by Reuters/Brendan McDermid
The U.S. securities regulator quizzed Elon Musk over a tweet in which he raised doubts over $44 billion acquisition of Twitter due to concerns over fake users on the platform.

The U.S. Securities and Exchange Commission (SEC) asked Musk in a letter whether he should have amended his public filing to reflect his intention to suspend or abandon the deal, according to the June 2 letter made public on Thursday.

The agency was referring to his May 17 tweet in which he said the "deal cannot move forward" until Twitter provided more data about how the company handled fake accounts.

The letter shows the SEC has been tracking Musk's statements on the blockbuster deal, increasing pressure on the Tesla Inc boss who has been locked in a feud with the SEC over his tweets about Tesla since 2018. The agency already has several open probes into Musk, according to court filings and media reports.

Musk said on Friday he was terminating the deal because the social media company had breached multiple provisions of the merger agreement, although on Tuesday Twitter sued Musk alleging he had broken the terms of the deal and made misleading statements about its operations.

Securities lawyers said they expected the SEC would scrutinize Musk's public statements on the deal to assess whether he misled the market as to his intentions, Reuters reported on Thursday.

In April, the SEC asked Musk whether the disclosure of his Twitter stake was late and why it indicated that he intended to be a passive shareholder. Musk later refiled the disclosure to indicate he was an active investor.

The SEC said in the letter it had inquired about the May 17 tweet with Musk's legal counsel the following day, but had not received a response more than two weeks later. The SEC added if Musk did not respond, it may decide to release publicly all correspondence, including the letter.

Musk's lawyers said in a June 7 letter that the tweet did not require an amendment because Musk's plans for the deal had not changed at that time.

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