Things to know why Tesla’s CEO Elon Musk bought 9% of Twitter stack
Outspoken entrepreneur to join board of social media group
Here are three things to know
There may be clues in the dates.
Musk has more than 80 million followers on Twitter and is one of its most controversy-stoking users. Recently he has used the platform to complain about Twitter itself, prompting some analysts to say he bought the stake to try to influence the company.
In late March, Musk tweeted that “free speech is essential to a functioning democracy.” He then ran a poll in the same post, asking Twitter users if they believed that the site “rigorously adheres to this principle.” Of more than 2 million replies, 70.4% voted “no.”
Now it turns out that Musk was already a big Twitter shareholder when he posted the message. His share purchases were carried out on March 14, according to a disclosure on Monday, meaning he spent more than $2.4 billion.
On Capitol Hill, some U.S. lawmakers are pushing to amend Article 230 of the Communications Decency Act, which provides wide-ranging immunity from prosecution for social media companies over content that people put on their platforms. Proposed reforms could make them legally responsible for third-party content.
The platforms are in any case taking their own steps to control what content is shared and seen, sometimes controversially silencing prominent figures.
Musk’s claim that the freedom of speech should be respected on social networking sites puts him in potential conflict with those moves.
What is the relationship between Musk and Twitter’s management?
The emergence of Musk as Twitter’s major shareholder immediately puts the focus on his relationships with its executives, past and present, including co-founder Jack Dorsey.
With Twitter’s profitability trailing social media peers such as Facebook and its stock languishing, Dorsey attracted criticism from Elliot Management, an activist hedge fund that had taken a stake in the company. In the spring of 2020, Elliott started agitating for Dorsey’s resignation as CEO, and he eventually stepped down at the end of November 2021.
Musk and Dorsey are both well known as formidable supporters of cryptocurrencies such as bitcoin and have often exchanged public messages on Twitter. In 2021, Musk took the rostrum at a bitcoin-related event at Dorsey’s request.
Musk’s relationship with Dorsey’s successor, Parag Agrawal, is tricky. In December, Musk suggested a feud between Dorsey and Agrawal on Twitter, posting a digitally altered image from Stalinist Russia implying that Agrawal had dumped Dorsey into a canal.
Some analysts see Musk’s acquisition of Twitter shares, therefore, as an escalation of his challenge to current management and support for the former CEO.
What will happen next?
On Tuesday, Twitter announced it was appointing Musk to its board of directors, and that he had agreed not to increase his stake beyond 14.9%.
Musk is the world’s richest person, with net assets totaling $273 billion as of Sunday, according to the Bloomberg Billionaires Index, with most of his fortune based on his stakes in Tesla, SpaceX and other companies founded with his involvement. It is rare for Musk to buy listed shares purely for investment purposes, so analysts had expected him to want to get involved in the management of the company.
Behind the scenes, there may yet be confrontation. Agrawal was quoted in a media interview in 2020 as saying, “Our role is not to be bound by the First Amendment” to the U.S. Constitution, which guarantees freedom of speech.
But on Tuesday, pleasantries were exchanged on the platform. Agrawal tweeted that, “through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our board.” Musk tweeted back: “Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!”