Following SpaceX and Tesla boss Elon Musk becoming Twitter’s largest shareholder after recently acquiring a 9.2 per cent stake in the social media company, we look at the news, issues, and implications relating to this move.
9.2 Per Cent Stake
Elon Musk, who already had 80+ million followers on Twitter’s platform, has now acquired a 9.2 stake in the company, valued at around $3 billion, and making him the largest shareholder. Although the announcement was made earlier this month, he had already purchased the large stake in the company last month. By way of context, Twitter’s co-founder and former CEO Jack Dorsey only has a stake of just over 2 per cent in the platform. Dorsey stepped down as CEO in November 2021 and is leaving Twitter’s board when his term ends in May this year.
Popular With Investors
The original announcement that Elon Musk was buying the passive stake in Twitter appeared to be popular with investors as shares jumped nearly 30 per cent on April 4 after the filing at the Securities and Exchange Commission.
Not Joining The Board & Now An ‘Active’ Investor
Although it was initially announced, with much excitement by Twitter’s Parag Agrawal, that Musk would be joining the Board, Musk has, in the last few days announced that he will not be joining Twitter’s Board. Instead, his announcement that he would not be doing so was reportedly accompanied by an emoji of a face with its hand over its mouth, which is sometimes interpreted as a smirking expression.
Following the announcement that he would not be on the Board, shares fell in pre-market trade. Also, Musk has now re-filed his stake to show him as an ‘active investor’ rather than a passive shareholder. Being active rather than passive could allow Musk to exert more control over the company’s decision-making.
Being on the Board would mean that Musk would be limited to holding a maximum 14.9 per cent of Twitter’s stock. It would also have meant that Musk would have needed to curb some of his many Tweets about the platform.
Tweets About Products
In the days following the announcement, Musk posted a series of Tweets, some quite critical of the company and its products.
Musk’s investment also appears to have come with a caveat that he could continue expressing his views about Twitter’s services, Board, and management through social media and other channels, i.e. most likely through tweets.
Many different issues surrounding Musk’s investment in Twitter and its effects have been reported. The main issues include:
– A possible run-in with financial regulators due the investment in Twitter being filed on 14 March, but not announced until more than 10 days later, as is required under US securities law for acquiring 5 per cent of a company.
– Concerns that as an active investor, Musk could have a detrimental effect on the culture within Twitter, which Rumman Chowdhury, the director of Twitter’s machine learning ethics and accountability, sees as a “beautiful culture of hilarious constructive criticism”.
– Concerns over what some may see as his impulsiveness and freely speaking his mind possibly having a detrimental effect on the company. For example, his Tweets relating to Tesla in 2018, which led to an investigation from the Securities and Exchange Commission, plus last year, using Twitter to ask users if he should sell 10 per cent of his stock in his electric car firm Tesla. When the answer was yes, Musk sold around £3.7bn of shares in the company.
The biggest issue appears to be around Musk’s attitude to, relationship with, and use of ‘free speech’. Musk, who has described himself as a “free speech absolutist”, has expressed his concern that Twitter may not be living up to its free speech principles. In fact, Musk is reported to have conducted a Twitter poll just prior to buying the stake in Twitter where he asked whether his followers if they thought free speech is essential to a functioning democracy and whether they believed Twitter rigorously adhered to this principle. This led to some speculation that Musk could make changes to Twitter that could enable former President Trump, for example, to re-appear on the platform following being banned and the failure of his own platform ‘Truth’.
Also, following another of his Twitter polls, 73 per cent of Musk’s followers said ‘yes’ to the idea of adding an edit button to tweets, and this may be one of the “significant improvements” that Musk has said will be coming to the platform. Some critics have said that an edit button would help impulsive tweeters, such as Musk himself, and could also provide a lower key get-out clause than deletion for those such as celebrities, politicians, the very rich, and others in the public eye, and an escape from the influence of so-called ‘cancel culture’.
Other potential issues with the idea of ‘free speech’ is that some may define this as being able to say things that cause hurt to and disregard the rights of others, or even to spread fake news. Too much emphasis on changes that could increase free speech, therefore, is likely to be enough to make Twitter very nervous.
What Does This Mean For Your Business?
Elon Musk, through SpaceX, Tesla, his Twitter comments in the past, and now his stake in Twitter have all added to the value of (and interest in) his personal brand. A reputation for possibly being unpredictable and impulsive, living an enviable lifestyle, and including his followers in his decision-making, has gained Musk a huge following, ensuring that whatever he says has an immediate impact and that he enjoys the power that some world leaders have enjoyed, e.g. Trump.
There is, therefore, concern among some people that as the major shareholder, his influence over Twitter that his decision to stay off the Board and be allowed his free speech, and his power of essentially being the boss could take the platform, its culture, and its services in a new direction. Too much free speech on social media platforms could also run the risk of greater regulation. The controversy that sometimes follows Musk, combined with his controversial history may be making many at the platform feel uneasy. It remains to be seen exactly what major improvements are made, but the emphasis in free speech should make for some interesting developments in the near future.