Last Monday, Tesla CEO Elon Musk announced he had spent $2.9 billion to acquire a roughly 9.2% stake in Twitter, making him the largest shareholder of the social media giant.
The move quickly became the talk of the financial world, with speculation growing as to whether Musk, the world’s richest man and a prolific tweeter, would become a member of Twitter’s board of directors.
At first, it seemed not, since Musk reported his investment was “passive,” meaning that he didn’t plan to use his position to demand strategic changes at the company. But by the next day, Twitter’s CEO, Parag Agrawal, announced that Musk would in fact be joining the company’s board, with major changes to follow. As usual when it comes to Musk, though, that was just the beginning of the saga.
Musk’s original agreement to join the board came with a standstill that prevented him from buying more than 14.9% of Twitter’s stock, and, perhaps more important, left him with a fiduciary responsibility to act in the best interests of the company and its shareholders.
Now, according to an SEC filing released on Saturday, Musk will no longer be joining the board, but as an active investor, he can still push for changes at the company by, of course, tweeting out random suggestions.
Owing to an unusual provision in the filing, Musk disclosed that he now has the legal right to “express his views to the Board and/or members of the Issuer’s management team and/or the public through social media or other channels.”
It seems that Musk realized being on Twitter’s board might have kept him from enjoying one of his favorite pastimes: tweeting whatever he feels like.
When the largest shareholder does not want to be a fiduciary
Musk remaining on Twitter’s board would have required him, as a fiduciary, to act in the best interests of shareholders. That, in turn, would likely have prevented him from tweeting half-baked ideas, arguably indistinguishable from jokes or pranks, about the direction of the company. After all, an investor could likely sue him for not acting in line with his fiduciary responsibilities.
The hints that Musk and board representation wouldn’t mesh began on Thursday when Musk tweeted a picture of the time he famously smoked weed on Joe Rogan’s podcast, saying, “Twitter’s next board meeting is going to be lit.” And in a since-deleted tweet, he suggested Twitter Blue subscribers should be automatically verified and allowed to pay with Dogecoin.
By Saturday, Musk said he was no longer interested in being a board member, according to Agrawal, possibly because he realized some of his tweets may land him in hot water with the SEC, again.
“I believe this is for the best,” Agrawal wrote in a tweet announcing the decision, adding that he will “remain open to his [Musk’s] input,” but is urging the company to “tune out the noise” and stay focused on the work at hand.
Last weekend, after deciding to forgo joining the board, but before it was announced publicly, Musk was off to the races on Twitter.
First, he probed his followers over whether Twitter should convert its San Francisco headquarters into a homeless shelter “since no one shows up anyway.” His loyal supporters answered with a resounding “yes,” with 91% of the 912,867 votes cast. Hours later, Musk, now 50 years old, asked his followers if he should “delete the w in twitter,” offering the choice of “Yes” or “Of course.”
Both tweets were later deleted, but it was clear Musk was poking fun at Twitter’s management after having declined the option to join the board. And now, he can do just that—legally.
Wedbush tech analyst Dan Ives said the move is set to trigger a “Game of Thrones” battle between Musk and Twitter’s management as the Tesla CEO is likely to take a “more hostile stance” toward the company.
“Musk no longer joining the Twitter board could lead to a host of scenarios including 1) joining up with a private equity partner and forcing major strategic changes at Twitter and/or a sale, 2) creating more noise and angst for Twitter Board/execs with various proposed platform changes, or 3) Musk says ‘game over,’ reduces his stake, and goes home,” Ives wrote in a Monday note. “In our opinion, it’s likely paths 1 or 2.”
In the meantime, though, Musk is free to keep tweeting suggestions for the future of the company, and he’s not going to be liable for them as a company director, just as the owner of a multibillion-dollar chunk of Twitter.
On Saturday, the same day he quit the board, Musk seemed to be relishing his freedom, tweeting out a simple question: “Is Twitter dying?”
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