Twitter is struggling with an Elon Musk issue

SAN FRANCISCO – Bright and early Monday, Elon Musk sent the government a surprising new document.

In it, the richest man in the world set out his possible intentions for Twitter, in which he has accumulated a 9.2 percent stake, highlighting how he had drastically changed his position compared to a week ago.

Mr. Musk could, if he wanted to, buy more shares of Twitter and increase his ownership of the company, according to the document, which was presented to the Securities and Exchange Commission. He could freely express his views on Twitter on social media or other channels, the document notes. And he reserved the right to “change his plans at any time, as he sees fit.”

It was a promise, or maybe a threat. Either way, the presentation encapsulated the treacherous situation Twitter is now in. Mr. Musk, 50, Twitter’s largest shareholder and one of its top users, could very well use the social media platform against himself and even buy enough shares to take over the company.

“Twitter has always suffered more dysfunctions than its fair share,” said Jason Goldman, who was part of Twitter’s founding team and has served on its board in the past. “But at least we weren’t being actively controlled by potential board members who used the product we created.”

The presentation followed after a week of high-risk drama between the billionaire and the company. Last Monday, Twitter revealed that Mr. Musk had accumulated shares, now worth more than $ 3 billion, in the company. A day later, he was invited to the board of 11 Twitter people and agreed not to own or take over more than 14.9 percent of the company. Then, on Sunday, Twitter abruptly said that all of these bets were off and that Mr. Musk would not become a director.

What exactly happened between Mr. Musk, who has more than 81 million followers on Twitter, and the company’s executives and board members are unclear. But it leaves Twitter, which has survived the struggles between founders, boardroom riots and the wrath of outside shareholders, with an activist investor like no other.

Mr. Musk, who also runs electric car maker Tesla and rocket company SpaceX, is known for being unpredictable and open-minded, often using Twitter to criticize, insult and troll others. By resigning from the board, he was released from the corporate governance rules that would have forced him to act in the best interests of the company and its shareholders.

Mr. Musk leaned toward that freedom after his decision was communicated to the company on Saturday morning. He proclaimed on Twitter that he was in “goblin mode” and suggested changes such as removing the “w” from the company name to make it more vulgar and opening the San Francisco headquarters to accommodate the homeless. He later deleted some of the posts.

“This is not typical activism or, frankly, nothing like the activism we’ve seen before,” said Ele Klein, co-chair of the global shareholder activism group at law firm Schulte Roth & Zabel. “Elon Musk doesn’t do things that people have seen before.”

Patrick Gadson, co-director of Vinson & Elkins Shareholder Activism Practice, another law firm, said he was sympathetic to Twitter. “I would never want any director I represent, nor any director, to have to deal with this situation,” he said.

Mr. Musk did not respond to requests for comment. He did not directly address the situation with regard to the Twitter board, but he liked a tweet suggesting that the company wanted to restrict his rights to free speech.

Parag Agrawal, the CEO of Twitter, alluded to how Mr. Musk should have acted as a “company trustee” in a publication Sunday. Twitter, which on Sunday briefly posted a biography of Mr. Musk, as a member of its board, declined to comment Monday.

Credit …via Twitter

Mr. Musk has long shown a significant disregard for corporate governance rules. In 2018, he faced charges of securities fraud after inaccurately tweeting that he had secured funding to take Tesla privately. Musk later agreed to pay a $ 20 million fine to the SEC and leave Tesla as president for three years.

He also agreed to allow Tesla to review its public statements about the company. But in 2019, the SEC asked a judge to arrest him on suspicion of violating the terms of the agreement by continuing to erroneously tweet about Tesla.

On Twitter on Monday, employees were dismayed and worried about Mr.’s jokes. Musk, according to half a dozen current and former workers, who were not allowed to speak publicly. After the billionaire suggested over the weekend that Twitter turn its headquarters into a shelter for the homeless because “no one shows up anyway,” employees asked how Mr. Musk would have known since he hadn’t visited the building in a long time. They also pointed out that Mr. Musk, whose net worth has been set at more than $ 270 billion, could easily afford to help the homeless in San Francisco.

Others said they were upset with Mr. Tweets. Musk criticized the company’s product and business model, noting that he did not appreciate the time and thought that Twitter’s services had been updated over the years and that he did not know the company’s roadmap. product. Some employees said they were relieved to read that Mr. Musk would not join the board, according to people who saw the internal communications on Twitter.

When it still seemed that Mr. Musk would join the board, Mr. Agrawal scheduled a question and answer session for Mr. Musk responded to employee concerns. The session has been canceled, said a person aware of the decision.

The push of Mr. Musk is the second time in two years that Twitter has dealt with an activist investor. In 2020, investment firm Elliott Management accumulated a 4 per cent stake and used its position to push for change, including the removal of Jack Dorsey as CEO and more aggressive financial growth. Mr. Dorsey resigned in November.

Elliott’s approach followed the typical formula of investor investors: Acquire a significant stake in a company and then push for a change in government and strategy to raise the price of shares.

“An activist is usually very clear about their intentions,” said Rich Greenfield, an analyst at LightShed Ventures, a venture capital fund. But “we don’t know what Elon Musk’s real motivation is. Is this Elon having fun? Is this Elon trying to make a difference? Is this Elon trying to get the shares up?

Twitter is especially susceptible to activists, analysts said, because its founders did not structure the company’s actions in a way that gave them more control. The founders of Google and Facebook have maintained voting power over their shares, giving them unbridled control over the direction of their businesses.

Natasha Lamb, managing partner of Arjuna Capital, an activist investment firm that owns some Twitter shares, said Mr. Musk was taking a more informal approach than other activist investors.

“Musk is using Twitter to hear his views, but it’s not a basic activity,” he said. “Looks like he’s doing it for fun.”

What’s fun for Mr. Musk may be less for Twitter. The relief among Twitter employees who no longer joined the board was short-lived, current and former employees said, when they realized he was no longer bound by an agreement not to buy more shares or do – takes care of the company.

Mr. Musk could continue to play with Twitter, current and former employees said they had noticed. Several added that they were afraid of what might come next.

Lauren Hirsch provide reports.

New Technology Era

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