The U.S. Securities and Exchange Commission (SEC) has initiated legal action against billionaire entrepreneur Elon Musk, accusing him of failing to disclose his ownership of Twitter  (now X)  stock before purchasing the social media site within the mandated timeframe of early 2022.

As an outcome, the SEC claims Musk was able to underpay "at least $150 million" for shares he purchased after failing to disclose his ownership of more than 5% of Twitter's stock. Musk purchased Twitter in October 2022 and subsequently named it X.

“Because Musk failed to timely disclose his beneficial ownership, he was able to make these purchases from the unsuspecting public at artificially low prices, which did not yet reflect the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose,” the securities regulator stated.

“In total, Musk underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm.”

Musk began accumulating Twitter shares in early 2022, and by March of that year, he owned more than 5 per cent of the shares. The complaint states that at this point, he was instructed by law to reveal his ownership but was unsuccessful until April 4, 11 days after the report was submitted. The X and Musk representatives did not instantly return messages seeking comment. 

After signing an agreement to purchase Twitter in April 2022, Musk attempted to back out, causing the firm to sue him and force him into the acquisition.

The SEC has stated that beginning in April 2022, it would conduct an investigation into whether any securities laws were violated in connection with Musk's purchases of Twitter stock, as well as his remarks and SEC filings about the company's stock.

Before filing the lawsuit, the SEC went to court to compel Musk to testify as part of its investigation into the Twitter purchase. Current SEC Chairman Gary Gensler plans to resign from his position on January 20, and it is unclear whether the new administration will continue the case.