Twitter Grapples With an Elon Musk Problem

SAN FRANCISCO – Bright and early Monday morning, Elon Musk sent the government a surprisingly new document.

In it, the world’s richest man revealed his potential intentions towards Twitter, in which he gained 9.2 per cent, showing how drastically his position had changed a week ago.

Mr. According to a document filed with the Securities and Exchange Commission, Musk, if he chooses, could buy more shares of Twitter and increase his ownership of the company. As the document notes, he can freely express his thoughts about Twitter on social media or other channels. And he “reserves the right to change his plans at any time, as he sees fit.”

It was a promise – or maybe it was a threat. Either way, the filing involves a betrayal situation in which Twitter now finds itself. Mr. Musk, 50, one of Twitter’s largest shareholders and one of its top-profile users, could make good use of the social media platform and even buy enough shares to take over the company.

“Twitter has always suffered more than its fair share of inaction,” said Jason Goldman, who was on Twitter’s founding team and has served on its board of directors in the past. “But at least we weren’t actively trolled by potential board members using the product we created.”

The filing came after a week-long high-stakes drama between the billionaire and the company. Last Monday, Twitter announced that Mr. Musk accumulated stock in the company, which is now valued at more than $ 3 billion. A day later, he was invited to Twitter’s 11-person board and agreed not to own or occupy more than 14.9 percent of the company. Then on Sunday, Twitter suddenly said that all those bets are off and Mr. Musk will not become a director.

Exactly what happened between Mr. Musk, who has more than 81 million followers on Twitter, and the company’s executives and board members are unclear. But he leaves Twitter – which has survived the founder’s fight, the boardroom uprising and the anger of outside shareholders – with an activist investor unlike anyone else.

Mr. Musk, who also heads electric car maker Tesla and rocket company SpaceX, is known for being unpredictable and outspoken, often using Twitter to criticize, insult and troll others. Having not joined the board for a long time, he freed himself from the rules of corporate governance, forcing him to act in the best interests of the company and its shareholders.

Mr. Musk leaned towards independence after informing the company of his decision on Saturday morning. He announced on Twitter that he was in “goblin mode” and suggested changes to the company name, such as “w” to make it more rude and to open its San Francisco headquarters to accommodate the homeless. He later deleted some posts.

“This is not typical activism or, frankly, nothing like the activism we’ve seen before,” said Elle Klein, co-chair of the global shareholder activism group at law firm Schultz Roth & Zabel. “Elon Musk doesn’t do things people have seen before.”

Patrick Gadson, co-head of shareholder activism practice at Vinson & Alkins, another law firm, said he sympathized with Twitter. “I never want any director or any director I represent to face this situation,” he said.

Mr. Musk did not respond to requests for comment. He did not directly address the situation on Twitter’s board but chose a tweet that indicated the company wanted to restrict his free speech rights.

Twitter’s chief executive Parag Agarwal explained how Mr. Musk would have had to act as a “company trustee.” A post On sunday. Twitter, which published Mr.’s biography. Musk, as a member of its board that still appeared late Sunday, declined to comment Monday.

Deposit …Via Twitter

Mr. Musk has long shown considerable disrespect for corporate governance rules. In 2018, he faced accusations of securities fraud after he inaccurately tweeted that he had obtained funds to privatize Tesla. Mr. Musk later agreed to pay a 20 million fine to the SEC and to step down 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 the judge to hold on to contempt for violating the terms of the settlement by continuing to tweet about Tesla by mistake.

Inside Twitter on Monday, employees were frustrated and worried by Mr. Musk’s moves, according to half a dozen current and former workers, who were not authorized to speak in public. The billionaire suggested over the weekend that Twitter was converting its headquarters into a homeless shelter because “no one is visible,” employees questioned how Mr. Musk must have known he hadn’t visited the building in a while. They also pointed out that Mr. Musk, whose net worth is estimated at more than $ 270 billion, could easily help homeless people in San Francisco.

Others said they were offended by Mr. Musk’s tweets, criticizing the company’s product and business model, noted that he did not appreciate the time and thought that Twitter’s services have been updated over the years and that he had no knowledge of the product roadmap. Some employees said they were relieved to read that Mr. Musk will not join the board of directors, according to people watching the internal communication on Twitter.

While it still appeared that Mr. Musk will join the board, Mr. Agarwal scheduled a question and answer session for Mr. Musk to respond to employee concerns. The session has been canceled, said a person familiar with the decision.

Mr. Musk’s pressure is the second time in two years that Twitter has dealt with an activist investor. In 2020, investment firm Elliott Management raised a 4% stake and used its position to push for changes, including the dismissal of Jack Dorsey as chief executive and more aggressive financial growth. Mr. Dorsey resigned in November.

Elliott’s approach followed the typical slogan for activist investors: acquire a significant stake in a company and then push for governance and strategy changes to raise share prices.

“Usually an activist is very clear in his intentions,” said Rich Greenfield, an analyst at Venture Capital Investment Fund, Lightshed Ventures. But “we don’t know what Elon Musk’s true inspiration is. Is this Elon cool? Is this Elon trying to influence change? Is this Elon trying to raise the stock? “

Twitter is particularly sensitive to activists, analysts say, because its founders have not designed the company’s stock in a way that gives them more control. The founders of Google and Facebook retain voting power over shares, giving them a greater grip on the direction of their companies.

Natasha Lamb, managing partner of Arjun Capital, an activist investment firm that owns several Twitter stocks, said. Musk took a more casual approach than other activist investors.

“Musk uses Twitter to hear his views, but that’s not the main activity,” she said. “It simply came to our notice then.

What fun for Mr. Musk may prove less for Twitter. The relief among Twitter employees that he no longer joins the board was short-lived, current and former employees said, when they realized they were no longer bound by an agreement not to buy more stock or take over the company.

Mr. Musk could continue to play with Twitter, current and former employees said they understood. Many added that they were afraid of what would come next.

Lauren Hirsch Contribution Report.

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