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Elon Musk appears to have violated a 50-year-old law when he purchased 9.2% of Twitter's stock to become the largest shareholder in the company.
According to a report by the Washington Post, Musk was legally required to notify the Securities and Exchange Commission when he surpassed a five percent stake in the company, which he did on March 14. But instead, he filed the required forms on Monday (April 4).
David Kass, a finance professor at University of Maryland's business school, told the Post that Musk's late filing netted him an additional $156 million. When he purchased the stock, it was trading at around $39 a share. When his purchase was made public, Twitter shares jumped to more than $50 a share.
He may have also misled the SEC on the required disclosure forms by claiming that he would be a "passive investor," which meant he had no plans to make changes or try to influence the company.
On Tuesday, it was announced that Musk would be joining Twitter's board of directors. He also tweeted that he planned to "make significant improvements to Twitter in coming months."
After he was appointed to the board, Musk filed a different form indicating his role was changing from a passive investor to an active investor.
Even if the SEC determines that Musk violated the law, he would only be subject to a relatively small six-figure fine. The SEC could try to go after the $156 million he earned due to the late filing, but legal experts believe that is a longshot.
The SEC "would have to be really angry with him to try that because they would have a good chance of a court rejecting that argument," Adam Pritchard, a professor of securities law at University of Michigan's law school, said.