EXPLAINS: What Elon Musk’s dance with Twitter really means

PROVIDENCE, RI (AP) – Tesla CEO Elon Musk’s big Twitter turnabout – where he revealed his massive stake in the company on social media, got a seat on the board, announced drastic changes and then rejected the board role – all happened in a week.

But its repercussions could continue if the mercury billionaire, who now has a 9% stake in Twitter, continues to push his ideas forward to reshape the business on social media.

WHY DIDN’T MUSK JOIN THE BOARD?

Musk said he informed Twitter on Saturday that he would not join the board after being invited five days earlier, according to a financial revelation. He did not explain why, but Saturday’s decision coincided with a barrage of now-deleted tweets from Musk proposing major changes to the company, such as dropping ads – its main source of revenue – and turning its San Francisco headquarters into a homeless shelter. Musk left a few traces on Twitter about his mindset, such as by “liking” a tweet summarizing the events as Musk going from “biggest shareholder for free speech” to being “told to play nice and not speak freely. “

WHAT DOES TWITTER SAY?

Twitter CEO Parag Agrawal said Musk’s participation was not “for the best” but did not give explicit reasons in a statement on Monday. Agrawal also left some traces, noting that Musk had been awaiting a background check, suggesting that Twitter wanted him on the board – rather than just as a major shareholder – because as a shop steward he would be legally and ethically obliged to act “in the interests of the company and of all our shareholders. “

HOW DID MUSK BUILD ITS HOLDING?

Musk has been tweeting for a long time, but he seriously started buying Twitter shares just a few months ago. He started Jan. 31 when he bought just over 620,000 shares at $ 36.83 apiece. On almost every trading day from then until April 1, he bought hundreds of thousands or millions of shares.

In all, Musk controlled 73.1 million Twitter shares from the most recent count, or 9.1% of the company. He spent $ 2.64 billion buying them all on the open market. The market value of the entire Twitter, including Musk’s share, is about $ 38 billion.

HOW BIG IS MUSK’S INSERTED COMPARED TO OTHERS?

Musk appeared to be Twitter’s largest shareholder until investment giant Vanguard Group filed a report late last week showing it had supplanted him.

Vanguard controls 10.3% of the company through investments made by its range of mutual funds and ETFs. Vanguard and other fund giants are often the biggest investors in any business, as money keeps pouring into their index funds from pension savers and other investors. But these fund giants are typically much more tenacious as owners than activist investors, who can push for new management teams or major changes in strategy.

WHAT COULD MUSK NOT DO IF HE WAS ON THE BOARD OF DIRECTORS?

Had Musk joined the board, he would only have been one of several voices in strategy discussions. And he could have gnawed at not being able to order the company around.

“The responsibility of the Board of Directors is to represent the shareholders,” said Harry Kraemer, clinical professor at Northwestern University’s Kellogg School of Management and former chairman and CEO of Baxter International. “They are not there to represent themselves.”

By rejecting a seat on Twitter’s board, Musk also escapes a promise to keep his stake in Twitter at 14.9% or less. Without that ceiling, he has the opportunity to build a larger stake where he can try to take over the company or help choose a list of executives that is more in line with his mindset.

“The 15% is an arbitrary number,” Kraemer said. “It is not the case that if you own 15%, you may or may not know anything else. I wonder, but maybe the idea was: If we hire him as a director and he can not buy more than 15%, it literally prevents him from taking control of the company. “

DIDN’T MUSK SAY THAT HE JUST WANTED TO BE A ‘PASSIVE’ INVESTOR ON TWITTER?

When Musk first revealed his Twitter share through an application to the U.S. Securities and Exchange Commission, he did so with a form of form often used by investors who do not plan to push for major changes in a company. But he has since changed this application to use a broader form of form, one that does not have the same limitations.

WHAT HAS MUSK SAID HE WANTS TO DO WITH HIS SHARES?

He said in an application to authorities Monday that he owns the shares for “investment purposes.” He said he can buy more, sell or just hold the shares, depending on what happens to the price and other factors.

He also said he may want to talk to Twitter’s board and its management team from time to time about strategy, as well as possible mergers, sales or acquisitions, among other things. The much-followed tweeter was sure to notice that he might be expressing his views on the company “through social media or other channels.”

Musk said he has “no current plans or intentions,” but that his plans may change at any time.

WHAT DOES MUSK REALLY WANT?

Much of Musk’s vocal criticism of Twitter in recent weeks has centered on his belief that it lacks free speech principles. The social media platform has angered supporters of Donald Trump and other right-wing extremist political figures, who have had their accounts suspended for violating its content standards for violence, hatred or harmful misinformation. Musk also has a history with his own tweets causing legal issues.

But as long as his attention is maintained, it is unlikely that Musk would make such a big game for Twitter if he did not also have strategic business interests, said Enrique Abeyta, a former hedge fund manager and editor of Empire Financial Research. It’s almost impossible to launch a new social media platform, so Twitter is offering the digital equivalent of first-class beach real estate that just needs some scam and fresh ideas that can range from taking it private to switching to a subscription-based model with fewer speech restrictions, Abeyta said.

“He has clearly shown interest in combining his philosophical beliefs and interests with his economic ones,” he said. “I think it would be very dangerous to discard him.”

COULD MUSK BE TWITTER CEO?

Probably not. Neither Musk – who already serves as CEO of Tesla and SpaceX and has been involved in a number of other technology ventures – nor will most investors think it’s a good idea.

“He’d rather be the president, the beast, the man who saved Twitter and also made $ 10 billion on it,” Abeyta said. “He’s the richest person in the world. It’s a shame to be CEO.”

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Choe reported from New York.

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