SAN FRANCISCO – Bright and early Monday, Elon Musk sent the government a surprising new document.
In it, the richest man in the world outlined his possible intentions to Twitter, in which he has accumulated a share of 9.2 percent, emphasizing how drastically his position has changed since a week ago.
Mr Musk could, if he chooses, buy more shares on Twitter and increase ownership of the company, according to a document submitted to the Securities and Exchange Commission. He is free to express his views on Twitter on social media or other channels, the document said. And he reserved the right to “change his plans at any time as he saw fit.”
It was a promise – or maybe a threat. Either way, the documentation encapsulates the insidious situation in which Twitter now finds itself. The 50-year-old Mr. Musk, Twitter’s largest shareholder and one of its most popular 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 than its fair share of dysfunction,” said Jason Goldman, who was on Twitter’s founding team and served on its board of directors in the past. “But at least we weren’t actively trolled by future board members using the product we created.”
The filing followed a week of high-stakes drama between the billionaire and the company. Last Monday, Twitter revealed that Mr Musk had amassed more than $ 3 billion in shares in the company. A day later, he was invited to a board of 11 people on Twitter and agreed not to own or take over more than 14.9 percent of the company. Then on Sunday, Twitter suddenly said that all these bets were ruled out 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 is unclear. But that leaves Twitter – which has survived the quarrel of founders, riots in boardrooms and the wrath of outside shareholders – with an investor activist, unlike anyone else.
Mr Musk, who also runs electric car maker Tesla and rocket company SpaceX, is known for being unpredictable and outspoken, often using Twitter to criticize, insult and troll others. By no longer joining the board, he was released from corporate governance rules that would require him to act in the best interests of the company and its shareholders.
Mr Musk leaned towards this freedom after his decision was announced to the company on Saturday morning. He announced on Twitter that he was in “goblin mode” and suggested changes such as removing the “w” on behalf of the company to make it more vulgar and opening the headquarters in San Francisco to shelter the homeless. He later deleted some of the posts.
“This is not typical activism or, frankly, something like the activism we’ve seen before,” said Ele Klein, co-chair of the global shareholder activism group at Schulte Roth & Zabel. “Elon Musk doesn’t do things people have seen before.”
Patrick Gadson, co-head of shareholder activism at Vinson & Elkins, another law firm, said he sympathized with Twitter. “I would never want any director I represent, or any director at all, to deal with this situation,” he said.
Mr Musk did not respond to requests for comment. He did not address the situation directly on the Twitter board, but liked a tweet suggesting that the company wanted to restrict his rights to free speech.
Parag Agraval, Twitter’s chief executive, hinted at how Mr Musk should behave as a “trustee of the company” in post on Sunday. Twitter, which posted a biography of Mr Musk as a board member, which was still visible late Sunday, declined to comment on Monday.
Mr Musk has long shown considerable 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. Mr Musk later agreed to pay a $ 20 million fine to the SEC and resign as chairman of Tesla for three years.
He also agreed to allow Tesla to review his public statements about the company. But in 2019, the SEC asked a judge to disrespect him for violating the terms of an agreement by continuing to tweet incorrectly about Tesla.
According to half a dozen current and former employees who are not authorized to speak in public, Twitter employees were intimidated and concerned about Mr Musk’s antics on Monday. After the billionaire offered Twitter to turn his headquarters into a homeless shelter over the weekend because “no one shows up anyway,” officials wondered how Mr. Musk would find out, given that he hadn’t visited the building. for some time. They also said that Mr Musk, whose net worth is estimated at more than $ 270 billion, could easily afford to help the homeless in San Francisco.
Others said they were upset by Mr Musk’s tweets, which criticized the company’s product and business model, noting that he did not value the weather and believed that Twitter services had been updated over the years and that he did not know product roadmap. Some officials said they were relieved to read that Mr. Musk would not join the board of directors, according to people who have reviewed Twitter’s internal communications.
While it still looked like Mr. Musk would join the board, Mr. Agraval scheduled a question-and-answer session to address staff concerns. The session was canceled, said a person familiar with the decision.
Mr Musk’s push is the second time in two years that Twitter has dealt with an investor activist. In 2020, investment firm Elliott Management gained a 4% stake and used its position to push for change, including the removal of Jack Dorsey as CEO and more aggressive financial growth. Mr Dorsey withdrew in November.
Elliott’s approach follows the typical formula for activist investors: acquire a significant stake in a company and then push for changes in management and strategy to raise the share price.
“Usually the activist is very clear about his 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 raise stocks?
Twitter is particularly vulnerable to activists, analysts say, because its founders did not structure the company’s shares in a way that gives them more control. The founders of Google and Facebook retained the right to vote on the shares, giving them enormous power over the direction of their companies.
Natasha Lamb, managing partner at Arjuna Capital, an activist investment firm that owns shares on Twitter, said Mr Musk had taken a more careless approach than other activist investors.
“Musk uses Twitter to hear his opinion, but it’s not the main activity,” she said. He seems to be having fun.
What is fun for Mr. Musk may be less for Twitter. Relief among Twitter employees that he was no longer joining the board was short-lived, current and former employees said when they learned he was no longer bound by an agreement not to buy more shares or take over the company.
Mr Musk may continue to play with Twitter, current and former officials have said they have realized. Several added that they were afraid of what might happen next.
Lauren Hirsch contributed to the reporting.