The SEC Can’t Find Victims
Disgorgement, private credit cyclicality, time value of hedge fund managers, pre-tax alpha and an SEC podcast.
In 2022, Elon Musk bought about 9% of the stock of Twitter Inc. US securities laws at the time required him to disclose his stake within 10 days after he acquired 5% of the stock. He hit 5% on March 14, 2022, so his deadline to disclose the stake was March 24. He didn’t file the disclosure, and kept secretly buying more stock.
When he ultimately disclosed his ownership on April 4, 11 days late, Twitter’s stock predictably jumped, as the market (correctly) anticipated that he would buy the whole company at a premium. Had he followed the law and disclosed his stake earlier, the stock (presumably) would have jumped earlier. But he didn’t, and from March 24 through April 3, he bought about 13 million more shares at lower, pre-disclosure prices. On some simple math, Musk saved about $143 million by illegally waiting to disclose his purchases so he could buy more in secret.1