What Elon Musk’s dance with Twitter really means

Enterprise

Musk now retains 73.1 million Twitter shares, or 9.1% of the enterprise.

By MATT O’BRIEN and STAN CHOE, Associated Push

April 11, 2022

PROVIDENCE, R.I. (AP) — Tesla CEO Elon Musk’s great Twitter turnabout — in which he disclosed his substantial stake in the social media firm, received a seat on its board, publicly floated drastic modifications and then turned down the board part — all happened in a week.

But its aftermath could linger if the mercurial billionaire who now holds a approximately 9% stake in Twitter carries on to press forward his thoughts for reshaping the enterprise of social media.

WHY Didn’t MUSK Be a part of THE BOARD?

Musk said he informed Twitter on Saturday that he wouldn’t be becoming a member of its board of administrators, just after being invited five times before, according to a economical disclosure. He didn’t demonstrate why but the Saturday conclusion coincided with a barrage of now-deleted tweets from Musk proposing significant variations to the corporation, these kinds of as dropping ads — its chief resource of earnings — and transforming its San Francisco headquarters into a homeless shelter. Musk still left a couple clues on Twitter about his wondering, such as by “liking” a tweet that summarized the functions as Musk heading from “largest shareholder for Cost-free Speech” to currently being “told to enjoy good and not communicate freely.”

WHAT IS TWITTER Saying?

Twitter CEO Parag Agrawal claimed Musk’s not signing up for was “for the best” but didn’t give explicit reasons in a assertion Monday. Agrawal also still left some clues, noting that Musk experienced been awaiting a background check out and suggesting that Twitter wished him on the board — alternatively than just as a important shareholder — simply because as a fiduciary he’d be lawfully and ethically bound to act “in the ideal passions of the corporation and all of our shareholders.”

HOW DID MUSK Develop HIS STAKE?

Musk has been tweeting for a lengthy time, but he began obtaining Twitter stock in earnest only a couple of months back. He began on Jan. 31, when he acquired a minor far more than 620,000 shares at $36.83 apiece. On nearly each single buying and selling day from then as a result of April 1, he purchased hundreds of thousands or thousands and thousands extra of shares.

Entirely, Musk was in management of 73.1 million Twitter shares as of the most modern depend, or 9.1% of the organization. He expended $2.64 billion purchasing them all on the open industry. The sector worth for all of Twitter, which includes Musk’s stake, is about $38 billion.

HOW Huge IS MUSK’S STAKE In contrast WITH Many others?

Musk seemed to be Twitter’s most significant shareholder right until expense giant Vanguard Team filed a report late previous 7 days displaying it experienced supplanted him.

Vanguard controls 10.3% of the company via investments designed by its suite of mutual resources and ETFs. Vanguard and other fund giants are typically the major investors in any organization, as dollars retains pouring into their index resources from retirement savers and other buyers. But these fund giants are generally considerably far more fingers-off as entrepreneurs than activist investors, who can force for new management groups or massive modifications in technique.

WHAT Could not MUSK DO IF HE Had JOINED THE BOARD?

Experienced Musk joined the board, he’d have been only one of quite a few voices in strategy discussions. And he could have chafed at not getting equipped to get the business all-around.

“The accountability of the board of directors is to signify the shareholders,” said Harry Kraemer, clinical professor at Northwestern University’s Kellogg University of Administration and previous chairman and CEO of Baxter Global. “They’re not there to symbolize themselves.”

By turning down a seat on Twitter’s board, Musk also will get out of a promise to maintain his ownership stake of Twitter at 14.9% or beneath. Totally free of that cap, he has the solution to make a greater stake, where he could test to consider over the corporation or assist elect a slate of directors extra aligned with his wondering.

“That 15% is an arbitrary number,” explained Kraemer. “It’s not like if you personal 15%, you can or can not do a thing else. I’m speculating, but maybe the considered was: If we provide him on as a director, and he just cannot purchase additional than 15%, that virtually stops him from taking manage of the corporation.”

Didn’t MUSK SAY HE WOULD BE JUST A ‘PASSIVE’ Investor IN TWITTER?

When Musk 1st unveiled his Twitter stake by means of a submitting with the U.S. Securities and Trade Fee, he did it with a type of type typically used by buyers who really do not approach to push for big variations at a corporation. But he has considering the fact that amended that submitting to use a broader variety of kind, a person that doesn’t have the very same limitations.

WHAT HAS MUSK Reported HE’LL DO WITH HIS SHARES?

He explained in a filing with regulators on Monday that he owns the shares for “investment functions.” He mentioned he may possibly buy much more, provide or basically maintain the shares, depending on what transpires with its cost and other elements.

He also explained that he could converse with Twitter’s board and its administration team from time to time about method, as perfectly as doable mergers, sales or acquisitions, amongst other issues. The commonly adopted tweeter was confident to notice that he might specific his sights to the corporation “through social media or other channels.”

Musk claimed he has “no present programs or intentions,” but that his programs could adjust at any time.

WHAT DOES MUSK Truly WANT?

Considerably of Musk’s vocal criticism of Twitter in excess of current weeks has centered close to his perception that it falls brief on free of charge speech ideas. The social media platform has angered followers of Donald Trump and other considerably-correct political figures who’ve had their accounts suspended for violating its information expectations on violence, loathe or unsafe misinformation. Musk also has a history of his personal tweets resulting in authorized difficulties.

But as extensive as his awareness is sustained, it is not likely that Musk would make this sort of a huge perform for Twitter if he did not also have strategic small business interests, stated Enrique Abeyta, a former hedge fund supervisor and editor of Empire Economic Analysis. It is just about extremely hard to start off a new social media system, so Twitter features the electronic equivalent of primary beachfront genuine estate that just demands some tinkering and contemporary concepts, which could variety from using it non-public to shifting to a membership-primarily based model with much less speech restrictions, Abeyta said.

“He obviously has demonstrated an curiosity in combining his philosophical beliefs and passions with his economic ones,” he stated. “I feel it would be pretty dangerous to price cut him.”

COULD MUSK BE TWITTER CEO?

Almost certainly not. Neither Musk — who currently serves as CEO of Tesla and SpaceX and has dabbled in a variety of other technology ventures — nor most buyers are probable to imagine which is a very good concept.

“He’d instead be the chairman, the spirit animal, the man who saved Twitter and also designed $10 billion on it,” Abeyta claimed. “He’s the richest person in the world. Staying CEO sucks.”