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SEC probes Musk for not properly disclosing Twitter stake
Meanwhile, social network's board rejects resignation of one its directors
America's financial watchdog is investigating whether Elon Musk adequately disclosed his purchase of Twitter shares last month, just as his bid to take over the social media company hangs in the balance.
A letter [PDF] from the SEC addressed to the tech billionaire said he "[did] not appear" to have filed the proper form detailing his 9.2 percent stake in Twitter "required 10 days from the date of acquisition," and asked him to provide more information. Musk's shares made him one of Twitter's largest shareholders. The letter is dated April 4, and was shared this week by the regulator.
Musk quickly moved to try and buy the whole company outright in a deal initially worth over $44 billion. Musk sold a chunk of his shares in Tesla worth $8.4 billion and bagged another $7.14 billion from investors to help finance the $21 billion he promised to put forward for the deal. The remaining $25.5 billion bill was secured via debt financing by Morgan Stanley, Bank of America, Barclays, and others. But the takeover is not going smoothly.
Now, Musk must secure $33.5 billion to fund the Twitter deal after a $12.5 billion margin loan against Tesla stock is set to expire. Tech stocks have taken a beating due to rising inflation and interest rates, and it's looking like even the world's richest man may struggle to pay for the social media giant in an all-cash deal.
Musk claims it "cannot move forward" until the social network proves less than five percent of all users are fake bot accounts, which Twitter's CEO Parag Agrawal insists is true. Twitter, however, filed a preliminary proxy statement with the SEC confirming Musk's initial offer to purchase Twitter at $54.20 per share in cash. "Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable," it previously said in a statement.
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Meanwhile, drama among Twitter shareholders continues to rise as the company's stock price dips. Some blame the decrease in share price – $40.17 at the time of writing – on Musk. He was sued for allegedly driving down the stock price to try and snag the company at a lower cost than his initial offer or is using this as an excuse to back out of the acquisition altogether.
Twitter's founder and ex-CEO Jack Dorsey has officially left the board. Egon Durban, a pro-Musk board director, tried to resign from the panel after shareholders voted to have him removed, but his request was rejected by Twitter in an SEC filing. Durban is reportedly a supporter of Musk's efforts to take Twitter private. He lost the confidence of Twitter stockholders due to him serving on the boards of six other companies already. His offer to leave was ultimately rejected.
"While the Board does not believe that Mr Durban's other public company directorships will become an impediment if such engagements were to continue, Mr Durban's commitment to reduce his board service commitment to five public company boards by the Remediation Date appropriately addresses the concerns raised by stockholders with regard to such engagements," Twitter said in the filing.
"Accordingly, the Board has reached the determination that accepting Mr Durban's Tendered Resignation at this time is not in the best interests of the Company." ®