On April 6, the US social media platform Twitter announced on Tuesday local time that Tesla CEO Elon Musk (Elon Musk) will join the company’s board of directors. The day before, Musk was revealed to have bought more than 9% of Twitter’s stock and became its largest shareholder. Analysts and investors are trying to figure out what that means for Twitter and how much influence he has on Twitter.
No privilege will be treated equally
Twitter CEO Parag Agrawal and co-founder Jack Dorsey both welcomed Musk to the company’s board. Agrawal tweeted: “He is both a passionate supporter and a vocal critic of the service, and that’s exactly what we need on Twitter and on the board to keep us on track in the long term. Inside grows stronger. You’re welcome, Elon!”
Twitter said it would not give Musk special treatment on the platform, even if he gets a board seat. A Twitter spokesperson said the platform is “committed to developing and enforcing its policies and rules fairly,” meaning Musk will be bound by the same rules as everyone else. In other words, Twitter may still ban or suspend Musk’s posts if necessary.
When asked about Musk’s potential influence, a Twitter spokesperson said that Musk and other board members do not have the authority to set company policy. The spokesperson added: “Our policy decisions are not made by the board of directors or shareholders. While the company’s board of directors plays an important role in providing guidance and feedback, day-to-day operations and decisions are made by Twitter management and employees. .”
Make specific terms to limit influence
Musk disclosed the increase in his Twitter stake in a regulatory filing with the SEC. This indicates that the move is a “passive investment”, which usually means the holder is not trying to control or influence the company. But that may change. In the future, Musk may choose to “take an active stake” and play a more important role in the company. If he does, he will need to file documents to notify the SEC and will need to state his intentions.
The Twitter board currently has 11 members, and Musk will be the 12th, at least until Dorsey leaves the post next month. But in terms of power, that means he needs to have strong support from the rest of the board and shareholders to ensure his proposal is approved. Tom Hayes, chairman of Great Hill Capital, said: “Musk could become active at any time. I think it was a proactive approach that Twitter put Musk on the board before he asked for it. .”
Twitter has set terms for Musk’s appointment to the board, which could limit his influence. Musk can hold no more than 14.9% of Twitter stock as long as he remains on Twitter’s board, or after 90 days, the filing said. In addition, Musk can only serve as a secondary director until 2024. “I think they set this condition because they didn’t want Musk to have unfettered control over the company,” Hayes said.
It’s unclear how much energy Musk will put on Twitter. In addition to leading Tesla, he is CEO of rocket company SpaceX and brain-computer interface company Neuralink.
Pushing Twitter to make big changes?
Howard Fischer, a partner at Moses Singer LLP in New York and a former SEC attorney, said: “It’s good for a company to report earnings, but it seems like it’s better to have a relationship with Musk. Good. Musk may not improve Twitter’s operating environment, or increase revenue or reduce debt, but it will be a good return in the stock market.”
Regardless of its financial impact, one thing has been confirmed: seemingly overnight, Musk has gained more sway over a company he is often criticized for. He has about 80 million followers on Twitter, many of whom are devoted admirers of Musk. Musk’s intentions with Twitter are unclear, but it’s possible he did it on purpose.
Musk has previously attacked Twitter’s content moderation policy, claiming the company has failed to uphold free speech principles. Musk has also pushed Twitter to create an edit button and allow users more control over the tweets they see in the news feed. Youssef Squali, an analyst at Truist Securities, who recommends buying Twitter stock, said: “I suspect that Musk will start relatively slowly, but then he will want to make some big changes, maybe More in the direction of free speech. I don’t think he ultimately cares about user growth and things like that.”
Twitter is no stranger to activist investors. In 2020, after Elliott Management pushed Dorsey to step down, the company struck a deal with the activist investor that included bringing in a $1 billion investment from private equity firm Silver Lake , and allowed Silver Lake and Elliott executives to get Twitter board seats.
Will Musk buy Twitter as a whole?
Wall Street analysts are already speculating about what Musk might do to Twitter. More to buy stocks? Get more board seats? Buy Twitter as a whole? Gordon Haskett analyst Don Bilson wrote in a note to clients: “Use your imagination, we’ll see. Will Dorsey like the idea of Musk buying Twitter, as Jay Like Jeff Bezos buying The Washington Post?”
Hayes said he doesn’t think it’s likely that Musk will seek to restructure or privately acquire Twitter. He explained: “Musk now owns a large stake in Twitter. As long as Twitter is willing to execute his ideas, there is no reason for Musk to want to take over the company. Twitter’s quick inclusion of Musk on the board shows that the company’s leadership is at least willing to Embrace the billionaire’s ideas.”
Musk could still push Twitter to change the company’s policies. Last month, he polled Twitter followers, asking if the company was “strictly adhering” to free speech principles. “Given that Twitter has become a de facto public town square, failure to uphold free speech principles fundamentally undermines democracy. What should we do?” he wrote.
Musk also accused the SEC of harassing his free speech rights in overseeing his communications with shareholders, after a 2018 tweet suggesting he had secured funding to take Tesla private. If Musk lives up to his promises of free speech, any major change to his Twitter image could lead to a more controversial platform, Squally said. He said while controversies tended to attract consumers, they would offend advertisers, something that boards should be wary of.
Fisher, a former SEC attorney, said Twitter management should be concerned about Musk’s nasty relationship with financial regulators, such as his numerous disputes with the SEC. Fisher also said: “If I were Twitter, I would be concerned that the addition of Musk would bring Twitter to the attention of the SEC.”
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