• Musk reached the 5% benchmark on March 14
  • The Tesla CEO only disclosed his stake in Twitter on April 4
  • The SEC requires investors with more than a 5% stake in a company to file a form within 10 days of surpassing the benchmark

Tesla and SpaceX CEO Elon Musk earned more than $150 million after he delayed filing a form wherein he disclosed his stake in Twitter, according to legal and securities experts.

According to a 50-year-old law, a person or group that acquires more than a 5% stake in a company is required to file a Schedule 13D or a “beneficial ownership report” form with the U.S. Securities and Exchange Commission (SEC). The form has to be filed within 10 days of the filer surpassing a 5% stake. The form will ask the filer a series of questions, including their background information, source of the funding and the purpose of their investment, such as a takeover or a merger.

While Musk did file a Schedule 13D, he only made his public disclosure on April 4. The Tesla CEO surpassed a 5% stake in Twitter on March 14.

Between March 14 and April 4, Musk continued to buy the stock at the price of $39 per share. He now has a total stake of 9.2%. Following his public disclosure, Twitter’s share price surged 30% and closed at more than $50 per share, netting Musk $156 million.

“I really don’t know what’s going through his mind. Was he ignorant or knowledgeable that he was violating securities law?” David Kass, a finance professor at the University of Maryland’s business school, told The Washington Post.

Adam Pritchard, a professor of securities law at the University of Michigan’s law school, told The Post that the SEC could fine Musk hundreds of thousands of dollars for the late disclosure. The agency could also argue in court that Musk should part with his profit. However, there is a chance that the court could reject the argument.

Musk has butted heads with the SEC in the past. In 2019, the agency asked a federal court to hold the Tesla CEO in contempt of court after he took to Twitter to issue an updated production outlook without seeking approval from his company’s lawyers.

“Tesla made 0 cars in 2011, but will make around 500k in 2019,” Musk wrote in a tweet.

The tweet violated an agreement that his company reached with the SEC in 2018 that required Tesla to establish “mandatory procedures to oversee and preapprove Mr. Musk’s Tesla-related written communications” that may contain material information.

SpaceX owner and Tesla CEO Elon Musk at the E3 gaming convention in Los Angeles, California, U.S., June 13, 2019.
SpaceX owner and Tesla CEO Elon Musk at the E3 gaming convention in Los Angeles, California, U.S., June 13, 2019. Reuters / MIKE BLAKE