WSJ What’s News - SEC Escalates Feud With Elon Musk

Episode Date: January 15, 2025

A.M. Edition for Jan. 15. The Securities and Exchange Commission sues the billionaire, alleging he misled shareholders about his Twitter stock purchases in the lead up to his takeover of the platform. Plus, after a long standoff, South Korean investigators arrest impeached President Yoon Suk Yeol over a short-lived declaration of martial law. And the WSJ’s Carrie Keller-Lynn explains how Israel’s tech sector has raked in more investment despite uncertainty from the war in the Middle East. Kate Bullivant hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

The SEC sues Elon Musk over his Twitter stock purchases alleging he misled investors. Plus South Korea's impeached president is arrested after a lengthy standoff. And Israel's tech sector sees a surge in investment despite ongoing conflict in the Middle East. The number of Israeli defense tech companies actually doubled, as some existing companies pivoted towards defense in search of an explosion of contracts and demand caused by both the war in Israel and also the war in Ukraine. It's Wednesday, January 15th. I'm Kate Bulevant for The Wall Street Journal, filling in for Luke Vargas.

And here is the AM edition of What's News, the top headlines and business stories moving your world today. The Securities and Exchange Commission is suing Elon Musk over allegations that he misled shareholders about his Twitter stock purchases in 2022. That was the year Musk bought a large block of shares in the platform before taking it over and renaming it X. The SEC claims that Musk disclosed his stake in Twitter 11 days late, allowing him to save more than $150 million on buying Twitter stock and hurting shareholders who sold at

artificially low prices because they didn't know about Musk's plans. While the lawsuit escalates the agency's long-simmering feud with the billionaire, journal reporter Dave Michaels says it's likely that President-elect Donald Trump will ask the SEC's next leader to drop the case. The SEC's investigation did take a long time, the better part of two years. Some of that delay was due to Elon's refusal at one point to testify in the SEC's investigation. This lawsuit comes now just one week before the Trump administration takes over and Elon Musk is of course a major ally of President Trump. It would be a historic move for the new president to simply order the

SEC to withdraw an enforcement action. The SEC is historically an independent regulatory agency that doesn't take orders from the White House. But Trump's own SEC chairman could take a different view of what it takes to settle this case. The SEC today believes Musk should pay significant penalties for his violation, but the price tag could drop considerably under the new administration. In a post on X, Musk called the SEC a quote, totally broken organization, while his lawyer

says the suit is a sham. South Korea's impeached president, Yoon Seok-yul, has been arrested over his short-lived declaration of martial law last month. After a lengthy standoff with lawmakers from Yoon's ruling party, who blocked the way into the presidential residence, and with thousands of protesters chanting against the arrest outside, Yoon finally gave in and was taken to the investigator's office. In a pre-recorded address, Yoon said the investigation against him, as well as the arrest warrant,

lacked legal merit. Tired of higher menu prices at restaurants, Americans are tipping less. That's according to Toast, which operates restaurant payment systems and found that the average tip has dropped to about 19.3%, the lowest in at least six years. The decline comes amid a fight that's

playing out across the country over how restaurant workers are paid. Journal reporter Heather Haddon says Chicago and Washington, DC have already made moves to increase tipped workers workers minimum wage. In DC where voters decided to stop having the tipped minimum wage for workers and move up to the standard minimum wage, which is around $18 an hour, restaurants have had to suddenly increase what they're paying for their workers. And to offset some of the costs, some of these restaurants have

moved to gratuities or service fees, which a lot of consumers don't like and has resulted, according to some restaurants and servers, in people tipping less. And with plans to push similar measures in New York, Illinois, Ohio, Arizona and Maryland this year, the fight over how restaurant staff are paid will be one to watch. The Biden administration is blocking imports from more than three dozen Chinese companies over their alleged links to forced labour in the country's Xinjiang region. The expansion of the so-called entity list announced yesterday is the largest ever and targets companies in the critical

minerals, textiles and solar technology industries. China denies accusations of human rights abuses and says the US law interferes in its internal affairs. And in markets today, investors will be watching as earnings season gets underway in earnest, with some of America's biggest banks set to report full-year results before the opening bell. They include Citi, Goldman Sachs, JP Morgan and Wells Fargo. Also due this morning is the latest reading of the Consumer Price Index. Economists expect annual inflation to come in at 2.9% for December compared with 2.7% a month earlier. Coming up we'll look at an unexpected surge in investment in Israel's tech

sector which has grown despite uncertainty caused by the war in Gaza. That story after the break. A Gaza ceasefire deal has yet to materialise. According to our reporting, Hamas went quiet without explanation late yesterday but talks have resumed today and negotiators say they remain optimistic. And while the tense weight continues to see a fidel to at least pause fighting can be struck, Journal reporter Kari Keller-Lynn writes that Israel's tech sector seems to have defied fears that the ongoing war would lead to investment drying up, and she joins me now. Kari, can you start by telling us a bit more about the current state of Israel's tech

sector and its importance. Israel's tech sector is considered by many to be second in global importance to Silicon Valley. And the fact that the war coming after a year that was already very difficult for Israel's tech sector in 2023 caused a lot of concern leading to a very low amount of investment into Israeli startups. However, recent data shows that Israel actually increased investment into the tech sector last year by about 28%. It drew about $10.6 billion in investment from both foreign and local investors. Now, this is also important within Israel because the tech sector is responsible for about 20% of Israel's GDP and 10% of its employment. It's so important that it's actually buoyed the Israeli economy throughout the war.

I want to ask you how the tech sector managed this recovery. But first, just remind us of the hurdles it was facing when the war broke out. Well, at the war's outset, Israel was in a state of calamity. Tens of thousands of Israel's nearly 400,000 tech workers were called into reserve service, which disrupted operations. At the time, there were rockets flying across the country. Foreign airlines overwhelmingly cut their service to Israel, which further spooked investors and made it harder for Israelis to reach their customers abroad.

Israel also experienced an explosion of negative global sentiment towards the country, which really introduced a new kind of business risk. And this is all in the backdrop of broader uncertainty, which led global ratings firms to lower Israel's credit rating. And so this created a lot of fear about the investment environment in Israel, so much so that many people I spoke to said they were actually quite surprised by how strong the Israeli tech economy performed in the past year. Okay, so what did help this performance? into the economy when the war started that really helped stabilize the general picture. But in terms of the tech sector itself, cybersecurity companies really led the way here. They massively increased the amount of investment that they received, so much so that they actually took

about 40% of the total dollars raised in 2024. And the second kind of big trend that we've been seeing is a renewed enthusiasm in Israeli defense tech. The number of Israeli defense tech companies actually doubled as some existing companies pivoted towards defense in search of an explosion of contracts and demand caused by both the war in Israel and also the war in Ukraine. One reason that Israeli defense tech has attracted

more investment and more interest is because the solutions that are developed in Israel have an immediate application on the battlefield and so they end up being tested in real life. Customers can see those results before deciding whether or not to purchase the technology. That was Journal reporter Carrie Keller-Lynn. Carrie, thanks so much for your time. Thank you. And that's it for What's News for this Wednesday morning. Today's show was produced by Daniel Bach with supervising producer

Christina Rorca. And I'm Kate Bulevant for The Wall Street Journal, filling in for Luke Vargas. We'll be back tonight with a new show. Until then, thanks for listening.