Critical Overview
Elon Musk recently acquired a 9.2% stake in Twitter, as announced in a filing on Monday. Musk’s purchase, which was worth $2.9 billion as of the end of trading on Friday, made him the largest shareholder in the company. The news of the purchase caused Twitter’s stock to rise by 22% during early trading. Although Musk did not disclose the purpose of the purchase or any plans for the company, he has been a vocal critic of Twitter policies. His high-profile criticisms of Twitter in the past have included a tweet about the platform’s failure to adhere to free speech principles that fundamentally undermines democracy. When an investor acquires 5% or more of a company’s shares, the purchase must be disclosed in filings with the Securities and Exchange Commission. A stake of less than 10% in a company is considered “passive,” but Musk’s acquisition may indicate a desire to play a more active role in Twitter.
Musk’s purchase of Twitter shares could prompt other activist investors to take a stake in the company. According to Dan Ives, a tech analyst at Wedbush Securities, Musk intends to force change at Twitter. Ives believes that the acquisition is a shot across the bow at Twitter’s board and management team, and that Musk’s investment is likely to prompt discussions. Even if Musk does not attempt to change Twitter’s operations, his acquisition could lead to other investors taking a stake in the company. Ives believes that Musk will probably attempt to change Twitter’s practices rather than starting a new, competing platform from scratch.
Musk is among the most popular tweeters, with 80 million followers. He uses the platform to disseminate news about both Tesla and SpaceX, the companies he leads, and has gotten into trouble in the past because of his tweets. In 2018, Musk tweeted that he would take Tesla private at $420 a share, and that he had “funding secured” to do so. However, it later became clear that funding was not secured. Musk ultimately gave up his role as Tesla’s chairman and paid a $20 million fine. He agreed to have any of his future tweets that might contain material information about the company reviewed by other executives at Tesla before sending them. Recently, the SEC has questioned whether Musk is complying with that provision of the agreement, and he is fighting with the agency in court.
Twitter’s recent turmoil includes the sudden resignation of founder Jack Dorsey as CEO, succeeded by Parag Agrawal. Musk expressed support for Dorsey in the past, and when Agrawal was named Twitter CEO, Musk tweeted his support for the “Indian talent” running major technology firms, including Twitter. However, he later tweeted a meme that depicted Agrawal as Joseph Stalin and Dorsey as a former Stalin confidant who was later assassinated. Morningstar analyst Ali Mogharabi suggests that Musk’s acquisition creates uncertainty about how Agrawal and the firm will respond to Twitter’s now largest shareholder.
Conclusion
Although Musk’s acquisition of Twitter shares raises questions about his intentions, it is not completely clear what changes he would like to see in the company. Musk’s criticisms of Twitter policies, including its failure to adhere to free speech principles, have been a topic of discussion. His acquisition may indicate a desire to take a more active role in Twitter, or it may lead to other investors taking a stake in the company. Musk is likely to attempt to change Twitter’s practices, rather than starting a new platform from scratch. His acquisition of Twitter shares has created uncertainty about how the company and its CEO, Parag Agrawal, will respond to his role as Twitter’s largest shareholder.
