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SEC publishes letter sent to Elon Musk about Twitter deal filings

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Yahoo Finance legal reporter Alexis Keenan explains the SEC letter sent to Tesla CEO Elon Musk, probing on the original filings for his Twitter deal.

Video Transcript

SEANA SMITH: Let's get to the latest on the Elon Musk Twitter saga. Now Elon Musk facing new questions about his offer to acquire Twitter, this time, from the Securities and Exchange Commission. Alexis Keenan is here with the details. Alexis, tell us about this and, I guess, also, how significant is this significant?

ALEXIS KEENAN: To be determined, and not the first time that Musk has been tussling with the SEC. But what this is, is a filing that we're seeing from Musk's lawyers, responding to a letter from the SEC. We knew that the SEC was probing him, asking him about his filings on the Twitter deal, saying, why didn't he do it on time? Why didn't he do this? Why didn't he do that?

This one in particular is about Musk's May 17 tweet. And we have that to show. This is the one where he's saying that he thinks that 20% of Twitter's accounts are fake or spam accounts. He goes on to say that his offer to buy the company was based on Twitter's SEC filings being accurate, and that Twitter's CEO had refused to show proof that those spambots were under 5% of all users on the platform. And he goes on, then, to say this deal cannot move forward unless Twitter's CEO or Twitter coughs up that information.

So that's what the SEC is concerned about here. On the 2nd of June, they sent Musk a letter, saying, explain why you're using the word "cannot," saying the deal cannot go through, because that seems to suggest that you are having second thoughts about this deal. And if so, why don't you amend the filing, saying that you're holding these shares-- there's a particular SEC filing that he has to make. And you have to amend that if there's been a material change to the facts in that original filing or your amended filings. So they want to know, why didn't you do that?

Twis-- Musk's lawyers respond to Twitter, saying this. They don't think that the tweet triggered any need to make an amendment. They said, despite Musk's desire to obtain information to evaluate the spam and fake accounts, there was no material change to his plans and proposals regarding the transaction at such time. So at least as of June 7, Musk thought the deal was still on. But--

RACHELLE AKUFFO: I mean, it's interesting. You see Musk usually having this stream of consciousness on Twitter that he's known for. But in this case, what could the consequences be for Musk?

ALEXIS KEENAN: So the SEC has not been too, too hard on Elon Musk. He had that 2018 agreement with the agency to step down as chairman of Tesla after saying that he had secured financing to take the company private. Also had to pay a hefty fine of $20 million, as did Tesla.

But the SEC, if it believes that there's some kind of lying by Musk here, which we don't know that at this point, they could refer it over to the Justice Department. They could go to the FBI for further inquiry. I don't see that being likely here. Right now, they seem to be just holding his feet to the fire, to say, amend your filings, keep the public updated. Because what they're concerned about, at the end of the day, is market manipulation.

SEANA SMITH: We'll see how all this plays out. I don't know. I keep going back and forth whether or not Musk is actually going to be held accountable. Twitter, we know, says that they want him to be held accountable.

DAVE BRIGGS: How do they hold him accountable will be the question. Can they force him to pay $44 billion for a company ultimately?

SEANA SMITH: We'll find out.

DAVE BRIGGS: We shall see.

SEANA SMITH: And they're saying that they only need, what, was it one week?

DAVE BRIGGS: A week, four full days.

SEANA SMITH: Four full days.

ALEXIS KEENAN: Four days, one week.

SEANA SMITH: Yep, exactly. All right, Alexis, thanks so much.