Musk is set to serve on Twitter’s board of directors until the company’s 2024 annual shareholders meeting. But buried in a regulatory filing outlining the terms of this agreement is a key clause: Musk cannot own more than 14.9 percent of the company’s stock more for as long as he’s a board member – and for 90 days after.
Musk already indicated his stake in the company would be passive in a Securities and Exchange Commission report filed Monday.
But on Tuesday, he filed amended paperwork known as 13D – a filing more commonly associated with activist investors – saying he had ‘no present plans or intentions’ to force a merger or sale, shake up the board or change the company’s dividend or share buyback policy.
Twitter executives announced on Tuesday that they were appointing Musk to the board following a flurry of calls between the Tesla CEO, Twitter CEO Parag Agrawal and independent Chairman Bret Taylor, the Wall Street Journal reported.
The decision followed Monday’s news that Musk had purchased a 9.2% stake in the social media giant – which makes Musk Twitter‘s largest single shareholder.
Many analysts still expect Musk, a longtime critic of Twitter, to shake things up on the board – as Republican lawmakers say they hope that Musk will reinstate conservative voices that have been booted from the platform.
Tesla CEO Elon Musk will now serve on Twitter’s board of directors after earning a majority stake in the company. He is pictured on March 22 in Germany
Twitter CEO Parag Agrawal tweeted out the news on Tuesday saying Musk ‘would bring great value to our board’
Founder Jack Dorsey also wrote that Musk ‘cares deeply about our world and Twitter’s role in it’
Musk, who has been critical of Twitter in recent months, said he was excited to make ‘significant improvements’ to the platform
According to SEC filings, Musk began buying shares on January 31, when the stock traded at just $36.83, and his purchases continued through April 1.
CEO Parag Agrawal tweeted out the news about his board position on Tuesday, saying the billionaire brings ‘great value’ to the company.
‘I’m excited to share that we’re appointing @elonmusk to our board! Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,’ Agrawal wrote.
‘He’s both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term. Welcome Elon!’
Former Twitter CEO, and founder, Jack Dorsey also welcomed Musk to the team, writing: ‘I’m really happy Elon is joining the Twitter board!
‘He cares deeply about our world and Twitter’s role in it,’ Dorsey wrote.
Musk later responded to Agrawal, saying: ‘Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!’
Under the terms of Musk’s appointment to the board, he cannot own more than 14.9 percent of the company’s stock – which means he will not be able to force an ouster of CEO Parag Agrawal (pictured)
Twitter stocks have surged since mid-March when Musk purchased his stake
Analysts say Musk will now be able to affect change at the social media giant.
He has long been critical of the company, tweeting out a poll on March 25 asking his more than 80 million followers whether they think Twitter ‘rigorously adheres’ to the principle of free speech.
In landing a board seat, experts say, Musk can now change how the social media operates, with AB Bernstein analyst Mark Shmulik telling the Wall Street Journal he will be in a position ‘to really kick up dirt.
‘He moved from the back seat of the car to the front side of the car,’ Shmulik said. ‘In fact, he’s probably the driver.’
Brent Hill, an analyst at Jeffries, also wrote in an investor note obtained by the Wall Street Journal: ‘We believe one of Musk’s main motives could be to influence [Twitter’s] moderation policies, which he has often criticized as being too restrictive.’
But Brian Wieser, global president of business intelligence at Group M, a part of ad giant WPP PLC, said any changes to the company’s regulations could deter advertisers.
‘Advertisers don’t want their brands associated with advocates for insurrection, or advocations for hate and harm,’ he said, apparently referring to former President Donald Trump who was banned from the platform for allegedly inciting violence ahead of the January 6 Capitol riot.
‘The don’t want to associate with environments which crate a toxicity for people who might be using the platform,’ Wieser said.
On March 25, Musk tweeted a poll: ‘Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?’
A day later, Musk, a prolific user of Twitter himself, said that he was giving ‘serious thought’ to building a new social media platform – a tweet which could now lead him into further trouble with the Securities and Exchange Commission
Meanwhile, numerous Trump supporters and GOP lawmakers have urged Musk to get the ex-president back on the platform.
‘Dear Elon Musk, bring back President Donald J. Trump,’ tax expert Julio Gonzalez tweeted Tuesday.
‘Musk joining the Twitter board is the first step in the right direction. Bring back Trump!’ echoed British broadcaster and former politician Nigel Farage.
They also accused the social media network’s woke leadership of ‘censorship’ including ‘shadow banning,’ which supposedly restricts a user’s reach without their knowledge or appearing to do so.
‘Twitter used to be an open field of free thought,’ television host Pete Hegseth said Tuesday on Fox & Friends, according to Mediaite. ‘Now the blue checkmarks like groupthink leftists police that thought and the corporate types at Twitter have been happy to enforce it.’
He added: ‘They pushed off Donald Trump. They pushed off a lot of conservatives. If he were to open that up, it opens up the conversation in America.’
‘The Left has determined that speech is violence. That’s their argument on so many of these things. If [Musk] attempted to bring Donald Trump back, which he should, the target is gonna be even bigger on his back.’
Conservative author and national security expert Brigitte Gabriel called for Trump’s return to the platform on Monday
Journalist Glenn Greenwald took to Twitter Tuesday alleging Democrats were afraid of Trump returning to the platform
Errol Webber, a Republican running for a California House seat, argued on Monday that Twitter should ‘give everyone who has been banned a second chance,’ including Trump
On Tuesday, tax expert Julio Gonzalez called on Musk to bring back Trump
Republican Study Committee Chair Rep. Jim Banks was among the first elected officials to praise Musk’s purchase on Monday
British broadcaster and former politician Nigel Farage argued Tuesday that Musk joining the board was the ‘first step in the right direction’ for Twitter
Rep. Marjorie Taylor Greene (R-Ga.) questioned on Monday if freedom of speech would return to the platform now that Musk has the largest shareholder
Calls for Trump’s reinstatement first came on Monday after news broke of Musk’s shareholder status.
‘Now that [Elon Musk] is Twitter’s largest shareholder, it’s time to lift the political censorship. Oh… and BRING BACK TRUMP!’ outspoken pro-Trump Rep. Lauren Boebert (R-Colo.) tweeted on Monday.
Errol Webber, a Republican running for a California House seat, argued that Twitter should ‘give everyone who has been banned a second chance,’ including Trump.
‘@ElonMusk is now the largest shareholder of Twitter. Time to get this platform back to its former glory,’ Webber wrote. ‘Step one – bring back President Trump! Step two – give everyone who has been banned a second chance. Step three – end all forms of political and other censorship.’
Former Trump Treasury Department official Monica Crowley also said: ‘He should demand the end of political censorship, company-wide reform, and the reinstatement of President Trump.’
Republican Study Committee Chair Rep. Jim Banks (R-Ind.) posted on Monday, ‘If [Elon Musk] can clean up Twitter and stop online censorship, I’m all for him taking over the whole damn thing.’
‘Will the new majority shareholder return freedom of speech to Twitter?’ questioned Rep. Marjorie Taylor Greene (R-Ga.). ‘It will require courage [because] the regime is heavily investing in a certain industry and threats will undoubtedly come. Yet the freedom of speech restored will enable us all to defeat them.’
‘Great job Elon Musk! Now reinstate President Trump!’ author Brigitte Gabriel applauded.
‘Dems & liberal activists groups have spent years co-opting the censorship power of tech billionaires and expressing gratitude to Google and FB execs for censoring their enemies off the internet,’ journalist Glenn Greenwald tweeted. ‘Now they’re petrified a billionaire who won’t censor for them may take over Twitter.’
But Twitter executives have pushed back against the calls for Trump to be reinstated saying in a statement to DailyMail.com Tuesday: ‘Twitter is committed to impartiality in the development and enforcement of its policies and rules.
‘Our policy decisions are not determined by the Board or shareholders, and we have no plans to reverse any policy decisions.
‘As always our Board plays an important advisory and feedback role across the entirety of our service. Our day to day operations and decisions are made by Twitter management and employees,’ the company noted.
Trump has not yet commented on Musk’s appointment to the board.
Twitter executives have said they will not reinstate former President Trump, saying in a statement to DailyMail.com: ‘Our policy decisions are not determined by the Board or shareholders, and we have no plans to reverse any policy decisions.’ The former president is pictured with Musk at the White House in February 2017
The news of Musk’s rise to power within the company also comes as the billionaire continues to face legal battles with the Securities and Exchange Commission.
The federal regulator is investigating Musk’s November 6, 2021, tweet asking his followers whether he should sell 10 percent of his Tesla stake.
The government agency reached a 2018 deal for Musk to get pre-approval on some of his tweets, following a Musk tweet that he had ‘funding secured’ to take Tesla private, which the SEC claimed defrauded investors.
Those legal battles are now likely to continue, as it is alleged he broke SEC rules after missing the ownership-disclosure deadline for his stake in Twitter.
Musk purchased 73.5 million shares of the platform on March 14, worth about $3 billion.
His shares represent a 9.2 percent passive stake in the company, according to the SEC 13G filing obtained by DailyMail.com. This type of filing is reserved for passive investors.
However, the SpaceX CEO has left himself open to penalties of up to $207,183 after he failed to disclose his ownership acquisition within 10 days of acquiring 5 percent of the company, as required by U.S. securities law.
Musk should have disclosed his shares by March 24 but didn’t sign the filing until 21 days after his purchase.
He also failed to include a certification indicating he didn’t acquire his stake in Twitter to change or influence control of the company, as is typically done when filing a 13G report, The Wall Street Journal reported.
Instead of including the certification in his form, Musk simply wrote: ‘Not applicable’.
While the civil penalty is a financial slap on the wrist for Musk – the world’s richest person with a $302billion net worth, according to Forbes – the entrepreneur could also face charges of market manipulation after his filing triggered a surge in the company’s stock value of more than 27 percent.
And, experts say, his March 26 tweet suggesting he was giving ‘serious thought’ to building a new social media platform could be seen as him manipulating the market after he already started buying large shares of the company.
‘This is not really a gray area. He acquired it and didn’t file within 10 days. It’s a violation. And so this is a slam dunk case from the SEC perspective,’ Adam C. Pritchard, a law professor at University of Michigan Law School, said.
‘Arguably, his social media posts about potential alternatives to Twitter can be seen, in light of his previously undisclosed stake, as a form of market manipulation to affect the share price, but proving that seems difficult,’ echoed Howard Fischer, a former SEC council and a partner at law firm Moses & Singer.
‘The fact that the revelation of his stake caused a price rise that resulted in Musk’s stake increasing in value is something that the SEC might look into.’
Tesla CEO Elon Musk tweeted out a poll Monday night asking his followers whether they would like Twitter to have an edit button
Twitter CEO Parag Agrawal tweeted afterwards that ‘the consequences of this poll will be important,’ apparently trolling Musk for saying the same thing in a March 25 tweet about whether the company ‘adheres to the principle’ of free speech
The company clarified on Tuesday that it was already working on adding an edit button before Musk’s poll, pointing to an April 1 tweet announcing their plans
But so far Musk seems comfortable in his new role, tweeting out a poll Monday night asking his followers whether they think Twitter should add an edit button.
CEO Parag Agrawal later responded to the tweet: ‘The consequences of this poll will be important. Please vote carefully,’ apparently trolling Musk for saying the same thing in a March 25 tweet when he questioned whether Twitter ‘adheres to the principle’ of free speech.
By Tuesday, the company clarified its position on the edit button, writing that it ‘has been working on an edit feature last year’ adding, ‘no, we didn’t get the idea from a poll.
‘We’re kicking off testing within @TwitterBlue Labs in the coming months to learn what works, what doesn’t and what’s possible.’
It added: ‘PS, we weren’t joking,’ attaching an April 1 tweet that they were ‘working on an edit button,’ which many had thought was an April Fools prank.