Twitter lives one of the most confusing moments of its recent history. On April 4, it was announced that Elon Musk would become the majority individual shareholder of the social network and would join its board of directors. Not a week after the bombing, the tech mogul was backing down and rejecting his board seat. The changes of address experienced in the last week throw the platform to an uncertainty in which hypotheses emerge. Why Musk’s step back? Does he want to take control of Twitter?
The richest man on the planet is known for being behind the business successes of Tesla, PayPal and SpaceX, but also for being considered the king of trolling, a charismatic and controversial character whose intentions are indecipherable and whose decisions are unpredictable. It was the fact that he entered Twitter through the front door – his 9.2% of the shares are more than four times the 2% owned by Jack Dorsey, founder of the company – and his resignation to enter its board of directors.
Why get on Twitter?
Many point out that Musk could have invested $2.4 billion to get on Twitter for fun. After the expulsion of Donald Trump from the platform, the billionaire has become his biggest attraction. With 81 million followers, he uses his account to promote his companies and to launch ‘shitposting‘, as the technique of posting deliberately provocative and inflammatory comments to anger or surprise others and distract them from other topics is known. His fierce fan community has long been asking him to buy the company and getting into it could just be a meme.
Musk is a vocal critic of Twitter and its content moderation policies. “Since it functions as a de facto public square, not adhering to the principles of freedom of expression undermines democracy,” he tweeted when he had already made the purchase of shares. That made platform employees fear that Musk’s growing influence on the board could translate into the trump comebackwho was expelled for instigating the ultra assault against the Capitol to try to forcibly stop the certification of Joe Biden’s presidential victory.
A hit on the way?
Musk’s decision not to be part of the board of directors has been received within Twitter with “exhausted relief”, according to the journalist Casey Newton. However, that could be short-lived, as it is speculated that after that gesture Musk could be planning a OPA hostilea purchase of shares from all the shareholders of the platform to achieve a stake that gives it a greater share of power in business decision-making.
Twitter’s internal legal mechanisms make that option complicated, but not remote. The company’s statutes state that no director can amass more than 14.9% of the shares. Parag Agrawal, CEO of Twitter since November, would have offered Musk a seat on the board to block a possible hostile takeover, which explains why he has gone from saying that the tycoon “will offer a lot of value to the board of directors” to saying that “it is better” do not enter Outside of Musk’s leadership, he can buy as many shares as he wants to try to impose himself. Money is not a problem: his fortune amounts to 268,000 million dollars, almost 90,000 million more than Jeff Bezos, founder of Amazon and second richest man in the world.
Avoid more legal problems?
Another more plausible explanation for this step back is that entering Twitter’s board takes the fun out of it. As a board member, Musk should have acted on the basis of the platform’s shareholders, legal obligations that would put him in hot water every time he wants to tweet controversial messages to manipulate the market. Only this weekend he has published (and later deleted) that the paid version of Twitter should be cheaper and without ads, he has launched a survey on whether it is a good idea to turn the company’s headquarters into San Francisco in a shelter for the homeless -since according to him few people work there during the pandemic- or wondering if “Is Twitter dying?”.
Musk has had legal problems with the US Securities and Exchange Commission (SEC) for four years. After being accused of tweeting unapproved information about Tesla’s stock, in 2018 Musk agreed to pay a $20 million fine and step down as president of the electric vehicle company (although he has remained CEO). The waters were relatively calm until Musk last November sold 10% of his stake in Tesla for 16,000 million after a vote of his followers on Twitter. The day before the sale, his brother Kimbal Musk sold shares worth 108 million. The SEC considers that the tycoon leaked privileged information and, after citing him in the investigation this February, Musk has returned to the charge, asking to annul the agreement reached in 2018.
This court war with the authorities goes beyond Tesla. The ‘Washington Post’ uncovered last week that Musk informed the SEC of the purchase of shares on Twitter later than it should have, which allowed him to continue buying them at a lower price. With that violation of the law he would have earned about 156 million dollars. This accumulation of problems is what could have led him to avoid a position within the Twitter address that would have ensured greater scrutiny of his actions.
What will happen now?
The future of Twitter is uncertain and part of it passes through the hands of Musk, who could choose to sell his shares, keep the ones he has or buy more. Last November, Dorsey unexpectedly resigned as CEO of the platform. Behind his departure could be Paul Singer, president of the vulture fund Elliott Management y cercano a Trump, with participation on Twitter. When that happened, Musk scoffed at the situation by comparing the new CEO, Agrawal, to Stalin.
Though their relationship is believed to be amicable, it’s hard to see what role Musk will play if shareholders seek to topple Agrawal to push for a turnaround at Twitter. The current director knows this and that is why in his message about Musk’s step back, what could be a warning is glimpsed: “there will be distractions, but our goals and priorities have not changed. Let’s put the noise aside and stay focused on work.”