The US Securities and Exchange Commission sued Elon Musk on Thursday to force him to testify about his accumulation of shares in Twitter, which the tech billionaire bought last year and has since renamed X.
Mr Musk quietly bought shares of Twitter between January and April 2022, amassing a 9 per cent stake in the company before offering to buy it outright. The SEC has said that Mr Musk missed a deadline to publicly disclose his purchases of Twitter stock. Investors are required to disclose their stakes within 10 days if they buy more than 5 per cent of a company’s shares, but Mr Musk did not do so, the agency said.
In the lawsuit, filed in US district court for the northern district of California, the SEC said Mr Musk was subpoenaed to testify last month about his stock purchases but failed to appear. Bloomberg earlier reported the agency’s lawsuit against the entrepreneur.
X did not immediately respond to a request for comment.
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Mr Musk offered to buy Twitter in April 2022 for roughly $44 billion (€41.75 billion), then tried to back out of the deal in July of that year. He completed his purchase of the company last October.
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His takeover has been the subject of several lawsuits and investigations by the federal authorities. The Federal Trade Commission has probed whether X had the resources to protect users’ privacy after he laid off much of its staff and several senior executives responsible for privacy and security resigned.
The agency has also sought to depose Mr Musk. Former Twitter shareholders have also sued Mr Musk for fraud in a case related to his belated disclosure of his stake in the company.
Mr Musk and X’s chief executive, Linda Yaccarino, have been focused on bringing advertisers back to the platform. Many advertisers have been skittish about returning after Mr Musk relaxed content moderation policies on the site.
Briefing bankers
Ms Yaccarino on Thursday met the bankers who financed Musk’s acquisition to brief them on X’s financial progress.
She said the group was testing three tiers of premium service, that would allow the company to charge customers different amounts depending on how many ads are shown.
X also said that while advertisers are returning to the social media platform, they’re bringing smaller budgets than before.
Ms Yaccarino said revenue was growing in the high single digits quarter-over-quarter across advertising, data licensing and subscriptions, she said.
Not including the cost of servicing debt, the company already is cash flow positive, she said. And it should reach that milestone even when including debt by the back half of 2024, she said.
The three-tiered plan would let the company woo consumers who may not want to pay the full price for premium service. Hints of the new three-tiered service first showed up in code for the Twitter app. The code indicated that the entry-level plan will include the normal amount of ads, and the standard plan will show half as many ads. The top-level offering won’t show any ads.
Mr Musk has also floated the idea of charging everyone who uses X a small fee, a move he said would help weed out bots.
Before Mr Musk he bought the company, Twitter was generating about $5 billion in annual sales, almost 90 per cent from advertising. Now it has to win back that revenue, and X owes about $1.2 billion in interest payments per year on its debt, Bloomberg earlier estimated.
Roughly 90 per cent of the company’s top 100 advertisers have returned, up from 75 per cent in June, Ms Yaccarino said Thursday. Ad spending isn’t at historical levels, though, and companies are ramping up budgets more conservatively, she said.
X likely still faces an uphill battle to placate lenders. After the takeover, some banks tried to offload the debt for just 60 cents on the dollar. Earlier this year, the company’s value had dropped to just a third of its purchase price, according to Fidelity.
Ms Yaccarino was formerly the ad chief at NBCUniversal Media, giving her experience courting big brands. The CEO’s efforts helped X ink a new deal with Paris Hilton and 11:11 Media this week to promote the company’s live shopping and video products. – This article originally appeared in The New York Times / Bloomberg
