Saturday’s erratic streak of tweets was unusual even for a CEO who gained 80 million followers through controversial 280-character posts that resulted in lawsuits and enforcement actions by the Securities and Exchange Commission.
But it is the best evidence that can be analyzed to help unravel the mysteries of what happened behind the scenes between his agreement a week ago to join Twitter’s board of directors and his decision to reject it on Saturday. The board position was paired with Musk becoming the company’s largest shareholder, with a stake of more than 9 percent.
“We have and will always appreciate input from our shareholders whether they are members of our Board of Directors or not. Elon is our largest shareholder and we will remain open to his input,” Twitter CEO Parag Agrawal wrote in a post Sunday night.
Conservatives announced the decision to ask Musk to join the board of directors, predicting that the Tesla CEO would advocate easing the company’s content policies — and possibly even repealing the Twitter ban on former President Donald Trump. Meanwhile, internally uneasy Twitter employees have expressed concern that Musk might invalidate the company’s progress in policing problematic content online.
“Twitter should approach an investor with a wild card who already owns nine percent of the company and has the resources to buy the remaining 91 percent,” Don Bilson, an analyst with Gordon Haskett Research Advisors, wrote in an email to clients now.
It is unclear what exactly happened and led to the reversal. Agrawal said Musk chose not to join the board at some point that morning, but he didn’t specify the exact time that morning, nor did he say which came first: Musk’s board seat decision or the storm of his tweets.
Musk liked a tweet from another user early Monday that theorized: “Elon has become the biggest contributor to free speech. Elon has been asked to play nice and not speak freely.”
Twitter declined to comment, and Musk did not respond to requests for comment.
Agrawal also mentioned that Musk had undergone a background check. According to someone who did a background check for high profile appointments to the board of directors, this likely looked for any information that, if made public, could cause harm to the company. This person said that Musk had to cooperate with such a check.
Musk was embroiled in a fight with the Securities and Exchange Commission over his tweets, one of which indicated that he had secured enough funding to take an advertisement for his company, Tesla, private, that caused a major stock movement.
On Tuesday, Musk was charged with securities fraud in Manhattan federal court by a Twitter contributor. The case centers on Musk’s late disclosure of his stake in Twitter. Under SEC rules, Musk had 10 days to disclose to the SEC that he had acquired more than five percent of the company. Musk reached that benchmark on March 14, but waited until April 4 to reveal the holdings, when the disclosure sent the stock up nearly 30 percent. The lawsuit, which is seeking class action status, alleges that anyone who sold Twitter shares during that window missed the price increase and therefore deserves compensation.
The lawsuit alleges that Musk had a motive to delay the disclosure because he continued to acquire millions of shares after the disclosure date. The lawsuit alleges that during that period, Musk saved $143 million by acquiring it at an artificially low price. The Washington Post reported last week that Musk made it based on the stock price at the time 156 million dollars by delaying disclosure.
Musk previously took to Twitter to criticize the company or seek feedback on the company. For example, he would like the company to add an “Edit” button, which would allow tweets to be changed after they’ve been posted. Twitter said it was working on it last week, after a survey published by Musk.
But Musk’s biggest predicament so far is Twitter’s refusal to allow some types of content.
“Freedom of speech is essential to a functioning democracy,” Musk wrote on Twitter on March 25, before the start of a poll asking, “Do you think Twitter strictly adheres to this principle?”
And more than 70 percent of the two million people who voted said “no”.
On Saturday morning, Musk informed Twitter that he will not be joining the board of directors, according to Agrawal statment.
Musk’s tweet storm continued after his notification. Shortly after 5 p.m., he saw that anyone joining the Twitter Blue subscription service should receive a checkmark for authentication. This appears to address a long-standing issue about the prevalence of spam accounts on the service, although it would be an unusual announcement from a new board member.
At 6:31 p.m., he launched a poll about whether Twitter should convert its San Francisco headquarters into a homeless shelter — “since no one showed up anyway.” It was a clear reference to the company’s undefined teleworking policy.
Fourteen minutes before midnight, Musk made a lewd joke. I overheard an earlier tweet about forming a university with the acronym TITS.
“Delete w in Twitter?” Musk asked.
Several of Musk’s tweets that day were later deleted.
Referring to fiduciary liability, Richard Greenfield, a partner at research firm LightShed Partners, said board members should be in the company — something Agrawal also noted in his announcement of Musk’s decision Sunday night.
Musk’s resignation from the board of directors could somehow give him more influence over the company. He is no longer limited by how he uses his voting power, nor is he limited to a 14.9% stake in the company, an agreement he made as a potential board member.
Now, Musk could team up with other contributors to force Twitter. As the new CEO, experts say Agrawal is particularly vulnerable to efforts to oust him. Musk could collect enough shareholder votes to replace board members and eventually fire Agrawal.
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