Billionaire Elon Musk’s decision to remain off Twitter’s board could mean that he intends to buy more company stock and exercise more, not less, influence over the social media giant.
Musk, who founded Tesla and is the wealthiest person in the world, surprised many when he suddenly became Twitter’s largest shareholder after buying 9.2% of the company. He surprised again by turning down a seat on the company’s board of directors, news of which fueled speculation about the billionaire’s next moves after it was announced Sunday night.
Musk has been openly critical of Twitter’s controversial handling of speech on its platform, and the initial massive stock purchase was praised by many free-speech activists who see Twitter as engaging in forms of censorship.
Mark Weinstein, founder of social media service MeWe and expert in privacy and free speech, told the Washington Examiner that Musk getting offered the board seat and then turning it down allows Musk to be much more critical about Twitter without concern about being a “nice guy” with the board members.
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“I think he assessed his strategy and his strategic approach to helping Twitter change, and it’s almost like mandating change at Twitter — his ability to mandate versus his ability to suggest,” Weinstein said.
Joining the board would have limited Musk’s ability to purchase more stock.
Aron Solomon, the chief legal analyst for Esquire Digital, said that Musk’s decision to abstain from the board “makes so much more sense” given the fact that he would have to limit his control of the company to just 14.9%, according to the agreement. Solomon, who noted that he isn’t the biggest Musk fan, did say Musk’s decision was a “brilliant strategic move.”
If Musk’s endgame is to own enough stock, more than 50%, to have a controlling interest in the company, then joining the board would be a terrible idea.
Solomon said that the scenario of Musk buying a controlling share of Twitter could play out in two ways, should he decide to take that route.
Musk could go directly to the shareholders and offer them more than the shares are worth, which is something that Solomon said could benefit both Musk and the shareholders. For instance, if Musk offered shareholders 10% more than their stock is worth now, and the stock goes up 15% upon news that he is the controlling shareholder, then both parties come out on top.
The other way that Musk can wrest control would be with a tender offer, in which he puts out a bid that is good for a certain amount of days, with the deal only being valid if his total share of the stock holdings ends up comprising more than 50% of the company.
Solomon used an analogy to describe a potential Musk takeover. For example, say Musk wanted to get into the high-end dining business — he could always start his own business, although that would take a lot of time and effort — or he could buy the French Laundry, a renowned three-Michelin star restaurant in California. Buying Twitter would be the equivalent of buying the French Laundry’s brand.
“Elon Musk controlling Twitter gives him the kind of platform that people like Donald Trump have only dreamed of,” Solomon said, pointing out that the former president’s efforts to start his own social media platform have thus far struggled.
Musk taking control of the company could be good for shareholders. Musk would likely push to expand the company and encourage growth, given that he has proven he can boost shareholder value in his other enterprises, such as Tesla, the stock of which has increased in value by a whopping 1,500% over the past five years, said Solomon.
Another possible factor behind Musk’s decision to stay independent was to avoid being confined to the strictures and limitations that apply to company directors.
Most notably, he probably would have chafed at company rules applying to directors’ public statements. Musk notoriously engages in carefree and trolling banter about Twitter.
For example, over the weekend, Musk sent out a poll to his 81 million followers asking whether the letter “w” should be deleted from Twitter’s name. The voting choices were “yes” and “of course,” although he later deleted the tweet. The Tesla founder also tweeted that “69.420% of statistics are false.”
“That type of infantile nonsense isn’t going to go with a board member,” Solomon said. “He doesn’t want to have conversations and disciplinary action potentially from board members. Because he wants to do whatever he wants.”
Despite the speculation, Weinstein said he doesn’t think that Musk is angling for majority share ownership because he doesn’t need that much leverage to still have a huge influence over how the company operates.
“I think he may be angling for a larger position. I’m not convinced he’s angling for over 50%,” said Weinstein.
Twitter CEO Parag Agrawal announced that Musk wasn’t joining the board by posting a note about the matter on Twitter late Sunday night.
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“We announced on Tuesday that Elon would be appointed to the Board contingent on a background check and formal acceptance. Elon’s appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board,” Agrawal said in a tweet.
