The disclosure by Tesla CEO (TSLA) CEO Elon Musk on Monday that he received a 9.2% share on Twitter (TWTR) represents just the kind of claim to US regulatory investors that could quickly diminish.
In February, the U.S. The Securities and Exchange Commission has proposed a change in the controversial “you can make disclosure rules” law to investors who buy a large block of public company stocks. Advances in electronic filing since the law was adopted in 1968, the organization says, make it possible to immediately notify shareholders of changes in stock ownership.
This change will reduce by half from 10 days to five days the time allotted to shareholders like Musk to disclose their purchase of more than 5% of the company's shares.
Eleazer Klein, a defense attorney and partner with Schulte Roth & Zabel, told, that the issue has a profound effect on Corporate America, which strongly supports change and the SEC, as well as activist investors who benefit many days when they can seize potential power. inefficient stock and negotiate changes with company management.
"They get a lot of push, a lot of power," Klein told the SEC.
In a SEC file on Monday, Musk identified himself as an inactive investor on Twitter, a social media platform at the heart of a nearly four-year legal battle between Musk and the organization. On Tuesday, Musk made a separate statement, changing his position to become an active investor - meaning he could directly or indirectly influence Twitter executives or its policies - and Twitter announced he would be a member of the company's board.
Musk's completion has completely missed SEC deadlines, despite the current agency requirement that shareholders who own more than 5% of a publicly traded company disclose their interest within 10 days. Musk's inclusion came 21 days after the purchase of Twitter shares.
Proponents of change from 10 to 5 days, including SEC Chairman Gary Gensler, say it will improve openness for investors, giving them advance notice of significant changes in company ownership.
"Even if Musk filed on time, on March 24, that means there was a 10-day period when Twitter stockbrokers did not know that Musk owned 9% of the shares," said Marc I. Steinberg, a professor of law at Southern. Methodist University and former SEC attorney.
He said the change could help shareholders become more equal.
"This is obviously important information," he added. "We can see how this has affected Twitter."
Critics argue that the change will undermine the efficiency of activist investors, who identify and expose inefficient companies. Activists who rely on rising stock prices between the time of purchase and the period following the disclosure of their position should have the time needed to make a profit from their work, Klein said. Some investors, he said, should not go back to the work of activists.
"If it comes out quickly, activists will not get the benefit of the stock rush," Klein said. "The market is there."
In Klein's view, the promoters of this change were pushing the lie by suggesting that the SEC 'current rules, enacted in 1968, were now obsolete, as files could now be sent electronically.
"They ignore the fact why [the law] was adopted," Klein said. “The SEC, when it took the law back in the 1960s, was looking to find the right balance of when markets should know the activist's information. And they decided in 10 days. ”
It was unclear whether Musk was eligible to be a traditional Twitter activist, Klein said, as the company apparently invited him to its board. Traditional activists, he explains, often campaign to shut down board members.
The comment period on the proposed change ends on April 11, at which time the agency may choose to accept the change, or keep the status quo pending further review and comment.
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