EXPLANATION: What Elon Musk’s dance with Twitter really means

But its fallout could linger if the fickle billionaire who now has a roughly 9% stake in Twitter continues to push his ideas for reshaping the business of social media.

WHY IS MUSK NOT JOINING THE BOARD?

Musk said he informed Twitter on Saturday that he would not be joining its board of directors, after being invited five days earlier, according to a financial disclosure. He did not explain why, but Saturday’s decision coincided with a barrage of now-deleted tweets from Musk proposing major changes for the company, such as removing ads, its main source of revenue, and transforming its San Francisco headquarters into a haven for people. homeless. Musk left a few hints on Twitter about his thinking, such as “liking” a tweet that summed up the events when Musk went from being “the biggest free speech stockholder” to being “told to play nice and not speak freely “.

WHAT DOES TWITTER SAY?

Twitter CEO Parag Agrawal said Musk did not join the initiative “for good” but gave no explicit reason in a statement Monday. Agrawal also dropped some hints, noting that Musk had been waiting for a background check and suggesting that Twitter wanted him on the board, rather than just as a major shareholder, because as a trustee he would be legally and ethically bound to act “in the best interests of the company and all our shareholders”.

HOW DID MUSK BUILD HIS PARTICIPATION?

Musk has been tweeting for a long time, but he started buying Twitter stock in earnest just a few months ago. He started on January 31, when he bought just over 620,000 shares at $36.83 each. On almost every trading day between then and April 1, he bought hundreds of thousands or millions more shares.

In all, Musk was in control of 73.1 million shares of Twitter at the most recent count, or 9.1% of the company. He spent $2.64 billion buying them all on the open market. The market value of all of Twitter, including Musk’s stake, is roughly $38 billion.

HOW BIG IS MUSK’S BET COMPARED TO OTHERS?

Musk appeared to be Twitter’s biggest shareholder until investment giant Vanguard Group filed a report late last week showing he had supplanted him.

Vanguard controls 10.3% of the company through investments made by its set of mutual funds and ETFs. Vanguard and other fund giants are often the biggest investors in any company, as money keeps pouring into their index funds from retirement savers and other investors. But these fund giants are often much more discreet as owners than activist investors, who can drive new management teams or big changes in strategy.

WHAT COULDN’T MUSK DO IF HE HAD JOINED THE BOARD?

If Musk had joined the board, he would have been just one of several voices in the strategy discussions. And he might have been irritated that he couldn’t order the company.

“The board’s responsibility is to represent the shareholders,” said Harry Kraemer, a clinical professor at Northwestern University’s Kellogg School of Management and former president and CEO of Baxter International. “They are not there to represent themselves.”

By turning down a position on Twitter’s board, Musk is also making good on a promise to keep his ownership stake in Twitter to 14.9% or less. Freed from that cap, he has the option of building a bigger stake, where he could try to take over the company or help elect a slate of directors more aligned with his thinking.

“That 15% is an arbitrary number,” Kraemer said. “It’s not that if you have 15%, you can or can’t do something else. I’m speculating, but maybe the idea was: if we hire him as a director and he can’t buy more than 15%, that literally stops him from taking control of the company.”

DIDN’T MUSK SAY HE WOULD BE JUST A ‘PASIVE’ INVESTOR IN TWITTER?

When Musk first disclosed his involvement on Twitter through a filing with the US Securities and Exchange Commission, he did so with a type of form typically used by investors who aren’t planning to push through big changes in a company. But he has since modified that layout to use a broader type of form, one that doesn’t have the same restrictions.

WHAT HAS MUSK SAID HE WILL DO WITH HIS STOCKS?

He said in a filing with regulators on Monday that he owns the shares for “investment purposes.” He said he can buy more, sell or just keep the shares, depending on what happens to its price and other factors.

He also said that he may speak with Twitter’s board and its management team from time to time about strategy, as well as possible mergers, sales or acquisitions, among other things. The widely followed tweeter must have noted that he can express his views to the company “through social media or other channels.”

Musk said he has “no current plans or intentions” but that his plans could change at any time.

WHAT DOES MUSK REALLY WANT?

Much of Musk’s vocal criticism of Twitter in recent weeks has focused on his belief that it falls short of free speech principles. The social media platform has angered supporters of Donald Trump and other far-right political figures who have had their accounts suspended for violating its content standards on violence, hate or harmful misinformation. Musk also has a history of his own tweets causing legal trouble.

But as long as his attention remains, Musk is unlikely to make such a big move for Twitter if he didn’t also have strategic business interests, said Enrique Abeyta, a former hedge fund manager and publisher of Empire Financial Research. It’s nearly impossible to start a new social media platform, so Twitter offers the digital equivalent of prime beachfront real estate that just needs a few tweaks and new ideas, which could range from going private to switching to a web-based model. subscription with fewer expression restrictions. Abeyta said.

“He has clearly shown an interest in combining his philosophical beliefs and interests with economic ones,” he said. “I think it would be very dangerous to rule it out.”

COULD MUSK BE THE CEO OF TWITTER?

Probably not. Neither Musk, who already serves as CEO of Tesla and SpaceX and has dabbled in a number of other tech companies, nor most investors likely think it’s a good idea.

“He would rather be the president, the spirit animal, the man who saved Twitter and also made $10 billion from it,” Abeyta said. “He is the richest person in the world. Being CEO sucks.”

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Choe reported from New York.

New Technology Era

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