Elon Musk one of the most enigmatic people in the tech sector, as evidenced by his recent decision to become Twitter’s largest shareholder. Tuesday, four weeks after he bought 9.2% shares on the social media platform, having bought nearly 73.5 million shares for a total of about $2.4 billion, Musk joined the board of Twitter, where he will remain until at least 2024.
Musk’s transition from passive shareholder to board member is huge – he now owns more than four times as much Twitter stock as founder Jack Dorsey. (Musk’s share was only announced on Monday, which is longer than the deadline set by regulators. what experts call “slam dunk” violation financial law.) His move also left many wondering what’s next for Twitter.
Musk joined back in June 2009 and has amassed 80.7 million followers to date. But despite being so popular on the platform, he has a long-standing love-hate relationship with her. In July 2016 he confessed his love for Twitter. Then in February 2017 he described it as “Hellscape Hater”. By December 2017 he return to love. In February 2019, Musk responded to Twitter founder Jack Dorsey by saying that “Twitter rules.” But in July 2020, he tweeted that Twitter sucks just a few months after he said it Dorsey had a good heart.
Musk’s hot and cold relationship with Twitter does little to explain why he bought into the company and joined its board, although there are many theories. Musk did not respond to a request for comment.
One hint can be found in his recent Twitter posts. Entrepreneur has long been an open book in the social network, speaking in 2018 that “my tweets are literally what I’m thinking about at the moment, not elaborate corporate nonsense that is actually hackneyed propaganda.”
And recent tweets have focused on the future direction of the platform. Since buying his stake in the company, Musk has been asking his followers about should Twitter open source its algorithm to check and the platform adheres to the principle of freedom of speech. He also tweeted to other users that he is worried about the impact of the Twitter algorithm on public comment.
This rhetoric gave hope to right-wing politicians who banned on the platform or saw your colleagues censored and alarm bells sounded for people concerned that Twitter’s success in tackling hate speech could now be reversed.
“It is clear that Elon is trying to play free speech,” says crypto investor Maya Zehavi, who has owned Twitter shares since 2019. “I think he will probably try to use his influence on the board to make sure Twitter doesn’t try to enforce stricter censorship rules than necessary.” This reasoning holds true for Adam S. Pritchard, a professor of law at the University of Michigan who specializes in corporate and securities law. “I don’t think there’s any big mystery about why he made this investment,” he says. “His tweets suggest he has ideas that could improve Twitter.”
Activist shareholders, which we can assume is Musk in this case, usually take their stakes for one of three reasons, says Anil Dash, CEO of software startup Glitch. They either step in to split the company, which Dash says doesn’t make sense for Twitter, or appoint a captive CEO (which Dash thinks is possible), or collect the dividend for themselves. The latter won’t work since Twitter isn’t making any money yet. “Musk isn’t working on any of those things, so he’s just making sure he gets privileges on the platform and then he tries to bring back fascists like Trump,” Dash says.
Twitter spokesman Adrian Zamora said that Twitter is committed to impartiality in developing and enforcing its policies and rules. “Our political decisions are not determined by the board of directors or shareholders, and we do not plan to reverse any political decisions,” says Zamora. “As always, our Board of Directors plays an important advisory role and provides feedback throughout our service.” Zamora says day-to-day operations and decisions are made by Twitter management and employees.
The stake Musk bought — just under 10 percent — could also be key. Anyone who owns more than 10 percent any class of equity securities is considered “insider” by the Securities and Exchange Commission (SEC) and is subject to much more scrutiny. This is a policy mandated by Section 16 of the Securities Exchange Act of 1934, and the SEC is likely looking to investigate it after previously slapping Musk on the wrist, accusing him of defrauding investors by tweeting that he provided funding for Tesla’s privatization in 2018 year and settlement of a claim it turned against him. The settlement also included a requirement that Musk get approval for certain tweets regarding his financial activities before going public.
However, other elements of Musk’s new arrangements with Twitter, including his seat on the board of directors, leave him vulnerable to setbacks. profit liability. The agreement would not allow Musk to exit any investment for six months without losing potential profits (when Musk announced he had bought Twitter shares, the price rose from $39.30 per share to a high of $53.84). However, Twitter filing with the SECwhich confirms that Musk will sit on the company’s board of directors, and also shows that he has a two-year term as director, which will prevent him from pumping and dumping Twitter shares.
There’s an interesting inaccuracy in that documentation: Musk can’t own more than 14.9% of Twitter shares while he’s a board director and for 90 days thereafter, in what Pritchard calls a “freeze.” He calls it a “quid pro quo” that helps keep the company from being taken over. “The current management thinks they are doing a great job and would rather not be fired. They bought some protection from this at the price of giving him a seat on the board of directors,” Pritchard says. It wouldn’t be that expensive in most cases, but Musk isn’t like most people. “Elon Musk comes with his headaches,” Pritchard says. “I believe they thought long and hard about it.”
Another theory deserves no less weight: Musk is doing this for the lulz. “I think people attribute too many plans to him,” says Dash. Instead, Dash believes Musk is playing with attention, which could have long-term consequences. “At the highest level, being a board member is a job,” he says. “Responsibility of work is corporate governance. Musk is clearly bad at this, as evidenced by his highly dysfunctional and irresponsible advice.” Past anguish with Tesla’s reign has been detailed from 2018and Musk recently sued Tesla shareholder for allegedly making superprofits.
Buying Twitter shares, like many of Musk’s actions, could be an incredibly expensive way for him to keep his name in the spotlight, says Carey Cooper, professor of business at the Manchester Business School. “He loves the media,” says Cooper. “He is an entrepreneur, he is unusual, he is a character. And Twitter is a communication tool.”
Others believe the deal makes sense and could end up being beneficial rather than detrimental to the platform. “It’s very interesting to have a Twitter superuser on the board,” Zehavi says. Musk is the master of Twitter. He knows how to work Twitter in such a way that even Jack [Dorsey] did not.” Zehavi does see the move from a supposedly passive investor, according to SEC filings, to active participation on Twitter’s board of directors as an opportunity for Musk to poke his nose at the regulator. “Like any opportunity to mock the SEC, Elon will take it,” she says. And that, she argues, raises more serious concerns about Musk’s actions. “The fact that someone can use so much power without any real consequences is strange.”
What happens next with Twitter depends largely on the whims of the person who long had a reputation as a man high peculiar. But one thing is certain: the whole process goes against SEC regulations. “Most people work hard to get along and stay out of trouble,” Pritchard says. Musk, he argues, not so much. “I would say it is the other way around. His attitude towards the SEC can be described as dismissive.”
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Credit: www.wired.com /