On January 14, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Elon Musk, accusing him of failing to disclose his shareholding in a timely manner during the acquisition of Twitter (now called X), thereby purchasing shares of the platform at an "artificially low price."

SEC accuses Musk of underpaying more than $150 million

The SEC claims that Musk owned more than 5% of Twitter's common stock in March 2022 and was required to disclose it to the SEC within 10 days, but he did not disclose it until April 4, 2022.The SEC believes that if Musk disclosed it in a timely manner, Twitter's share price could rise significantly, while Musk continued to increase his holdings at a low price during the undisclosed period, causing him to "underpay more than 150 million dollars when purchasing Twitter's common stock during that period."

In the lawsuit, the SEC argued that Musk should return the profits he improperly earned and pay additional civil penalties.

In response, Musk's lawyer, Alex Spiro, responded that "Musk had done nothing wrong" and called the lawsuit an "admission that the SEC was unable to bring an actual case."Spiro also said that the SEC's years of "harassment actions" against Musk ultimately ended in a single-clause "minor complaint" filed against Musk under Section 13(d), and that even if proven guilty, there would be only nominal punishment.

It is worth noting that the lawsuit against Musk was filed in the final days of SEC Chairman Gary Gensler's term, who will step down on January 20. It is unclear whether the incoming SEC chief will continue to pursue the case.

X (former Twitter) latest valuation

Although X is no longer publicly traded, investment giant Fidelity holds some shares in X through its Fidelity Blue Chip Growth Fund and regularly discloses its valuation of those shares.These valuations are seen as important measures of the company's overall health.

According to Fidelity's disclosure on August 31, 2024, the value of its X shares was only US$4.2 million, a decrease of 24% from the end of July.This valuation is 79% lower than the US$19.66 million when Musk acquired Twitter in October 2022.Fidelity's latest valuation suggests that X is currently worth just $9.4 billion, well below the $44 billion Musk paid.

Analysts believe that Fidelity's sharp decline in its valuation of X mainly reflects a decline in the company's advertising revenue.X has no longer publicly released quarterly financial indicators since it was privatized, but the market is generally believed that its advertising business is performing poorly.Advertisers reduced their advertising due to the chaos and uncertainty of the platform, resulting in a significant decline in advertising revenue.In addition, X's large number of layoffs and business adjustments after October 2022 have also had an impact on the financial situation.