Keeping Musk on the board meant the billionaire could only make trouble from inside Twitter and within strict constraints: Musk’s 9% stake could go no higher than 14.9%. He’d be a class II director until 2024, preventing him from taking over the company’s board. Not only would Musk be unable to take over Twitter, he likely wouldn’t have much impact on the service either, as influencing product decisions from the board is notoriously difficult.
Snubbing a board seat runs counter to how activist shareholders normally operate. Elliott Management Corp., which owns a large stake in Twitter, pushed to replace CEO Jack Dorsey in 2020 and nominated four directors for the board to give it more sway.
But Musk doesn’t go down conventional routes. He can simply tweet a product idea to his 80 million followers over a weekend and get Twitter to speed up changes that may or may not have been in the pipeline.
If buying 9% of Twitter was a capitalist power play, rejecting a board seat was a nuclear dropkick for the social media era. Musk has put himself in a position where he can now buy significantly more stock.(1) He can push the company on product ideas with the backing of millions of Twitter users. He’s free to bring his stake up to 51% and become majority shareholder. He could launch a hostile bid.
So why were Twitter’s shares trading 7% lower on Monday morning, wiping out gains from the excitement of Musk’s investment? Most likely because investors don’t buy it. Neither do I.
The one thing we know for sure about Elon Musk is that he is unpredictable. But I’ll go out on a limb and make a prediction anyway: Musk probably won’t acquire Twitter. Influencing a company is way more fun for someone like Musk than being responsible for it as a majority owner. History also shows that Musk doesn’t buy companies. He builds them from the ground up.
When it comes to assets already on the market — think Dogecoin, Bitcoin, GameStop Corp. or Etsy Inc. — he tends to talk them up and inflate their value, before losing interest and moving on.
When Musk tweeted that he “kinda loves Etsy” in January last year, the stock jumped by 9%. That same day he tweeted “Gamestonk!!” and GameStop’s shares went up by 60%. By the following month, Etsy had slid by 17%, GameStop by around 87%.
Musk is great at attracting attention to tradeable assets, sprinkling them with his unique brand of fairy dust that draws in legions of new fans. But he is not great at imbuing those assets with long-term value.
Twitter is admittedly a different story. Musk has spent close to $3 billion to become the social-media firm’s biggest shareholder, and he appears to have had serious discussions with its management. But as someone who has repeatedly thumbed his nose at the U.S. Securities and Exchange Commission, he is badly suited to guiding a social-media business, which increasingly involves heeding new rules from policy makers in Europe and elsewhere.
Judging by his tweets, Musk’s interest in Twitter seems more geared toward influencing the company in a direction that suits his ideological worldview, which, despite his brilliant engineering mind, includes a warped understanding of what free speech means.
He has, for instance, wrongly propagated the notion that Twitter is a “public square” obligated to protect free speech. As a private company, it is not. In his own business, he has conflated free speech with offensive speech, telling Black workers to be “thick-skinned” about racist language in Tesla’s California factory. He tweeted a meme comparing Canadian Prime Minister Justin Trudeau with Adolf Hitler last February.
In March, as he was quietly amassing shares in Twitter, Musk polled his followers with a loaded question about free speech. That kind of discussion is important in its own way, but none of it is helpful to Twitter as a company. Posting inane polls to millions of fans is a distraction, as Agrawal rightly said, not a smart way to steer an online product. (2)
At best, Musk is trolling Twitter’s management. At worst, he wants to push the company to loosen its moderation standards, giving him more leeway to tweet about whatever topic — from GameStop to Tesla and SpaceX — has or needs his attention. Somewhere in the middle, he’s turning Twitter into a volatile meme stock that could jump or slide in tandem with his state of mind. If history suggests anything, Musk is more likely to make trouble for the company than put up a bid.
(1) He has to discloseany changes equal to 1% or more.
(2) Though Musk raised reasonable points about enhancing Twitter’s ability to make money, such as giving everyone who signs up for Twitter’s subscription service a “verified” check mark, he also suggestedturning Twitter’s headquarters into a homeless shelter.
Parmy Olson is a Bloomberg Opinion columnist covering technology. She previously reported for the Wall Street Journal and Forbes and is the author of ‘We Are Anonymous.’
