Elon Musk proves once again that rules, standards do not apply to him

Elon Musk has proved once again that he will do things his own way, by announcing Friday that his $44 billion deal to buy Twitter is on hold. He shared the news in a tweet rather than in a formal filing with the Securities and Exchange Commission. The drama over the deal has continued to play out in a series of tweets between Musk and the company.
Since the SEC ruled in 2013 that using Twitter and other social media platforms is an acceptable way for public companies to disclose material information, this could be one of the legal ways it floutes the convention.

But many of Musk’s other moves over the years have broken the actual rules, not only circumvented the norms, but none of it has slowed him down or changed his behavior.

The financial sanctions that regulators or business partners can impose mean little to someone as wealthy as Musk. He walks and tweets proof that normal rules don’t apply to the ultra-rich if they choose to ignore them.

Case in point: Musk recently acquired nearly 10% of Twitter’s stock — without making the legally required timely disclosure.

An investor who buys 5% or more of a company’s stock has 10 days to disclose the purchases so that other investors can be aware of what affects stock prices.

Musk waited 21 days to make the disclosure, by which time he had bought 9.6% of Twitter’s shares. News of the takeover sent Twitter shares skyrocketing, even before announcing his offer to buy the platform and take it private.

If Musk had made the required timely filing, it likely would have cost him a lot more to collect the 15 million shares he bought after the 10-day deadline passed.

The delayed disclosure saved Musk $143 million by keeping the stock price lower than it could have been when he continued buying stocks, estimates Daniel Taylor, an accounting professor at the University of Pennsylvania.

The Wall Street Journal reported last week that the SEC is investigating Musk’s late coverage of his stake in Twitter.

“I think it could be laziness or the belief that rules don’t apply,” Taylor said. “But if you look at when the SEC forces late filing, it’s relatively rare. From a cost-benefit perspective, it makes sense not to file a return. Even if the cost of late filing could result in a $100,000 fine or a $500,000 fine.” be several million dollars, why wouldn’t he [delay filing]†

Musk’s previous big fight with the SEC in 2018, when he tweeted that he had “secured funding” to take Telsa private and send stocks higher, only encouraged the billionaire.
Musk eventually paid a $20 million fine and relinquished his position as chairman of Tesla, though he retained the CEO title, which the SEC had threatened to take from him as well. He must also have tweets containing material information about Tesla that have been approved by others at the company, but it’s not clear how far he’s met that requirement over the past four years.

Musk is still fuming over the settlement he signed with the SEC, claiming he did so only because otherwise banks would have cut funding for Tesla and forced the automaker into bankruptcy. But Taylor said the SEC’s action was nothing more than a slap on the wrist.

“They had the opportunity to send out a strong signal and chose not to,” Taylor said.

Other Rules Musk Ignores

The ownership disclosure rules are just the latest in a long line of rules that Musk has violated — with little or no repercussions.

Traditional car manufacturers are recalled when they discover a flaw in the design or construction of a car. That’s why the National Highway Safety Administration, the federal regulator, the agency that investigates consumer complaints and accident data, has named the Office of Defects Investigation.

But Tesla has been ordered to initiate recalls for building its cars exactly to plan. Musk has complied, but has also attacked the safety authorities for forcing him to make his vehicles less ‘fun’. And Tesla has not incurred any significant costs for its actions.
Tesla features that led to recalls include allowing front passengers — and possibly drivers — to play video games on the touchscreen in the center of the dashboard while the car is in motion, enabling cars to intentionally rolling through stop signs in self-driving mode.
Musk has also fought with the Federal Aviation Administration over testing SpaceX rockets without the required approval. In 2020, for example, the company conducted a short test flight of its forthcoming Mars rocket, dubbed Starship, without providing the FAA with proper documentation or assessments for its “public health and safety” risks, the agency said.

Even before the test flight took off, the FAA had denied a safety waiver that SpaceX had requested. But the company moved forward anyway.

An FAA investigation followed, but SpaceX eventually walked away with no more than orders for “corrective action.”

During the early days of the pandemic, Musk reopened his Tesla factory in California that had been closed due to stay-at-home orders that he attacked as “fascist.”
The provincial health department, which had ordered business closures to contain the spread of Covid-19, eventually gave in to its reopening plans.

— Jackie Wattles of CNN Business contributed to this report

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