Tech

Tesla CEO Elon Musk will sit on Twitter’s board of directors until at least 2024.

Why is it important: Twitter will appoint Elon Musk to its board of directors. The move comes after Tesla’s CEO spent $2.89 billion to acquire a 9.2 percent stake in the company. As a rule, a passive share is when the owner does not intend to influence the company. However, Musk’s recent Twitter activity indicates that he wants change.

In March, Musk criticized Twitter’s stance on free speech. In a survey, he asked followers if Twitter had “strictly adheres toto the principles set out in the First Amendment. Seventy percent answered, “No.” asking what to do with it.

After filing 13G with the SEC on Monday, Musk questioned followers again asking if Twitter should have an edit button by deliberately misspelling “yes” as “yse” and “no” as “enabled”. At this point, 73% think they should be able to edit their tweets. He also said he was looking forward to “significant improvements” to the platform after Twitter announced his appointment.

So, regardless of Musk’s passive 13G pitch, it seems clear that he would like to influence changes in the online “town hall”. However, it could be more than just giving Musk a chance to speak. Twitter may have taken his massive acquisition as a threat of a hostile takeover. According to the Securities and Exchange Commission registrationMusk will be limited in his ability to acquire a controlling stake in the company.

“The Company will appoint Mr. Musk to the Company’s Board of Directors (“Board”) as a Class II director with a term of office expiring at the Company’s annual shareholder meeting in 2024,” the SEC Form 8-K reads. “For as long as Mr. Musk serves on the Board of Directors, and for a period of 90 days thereafter, Mr. Musk shall not, either alone or as a member of the group, become the beneficial owner of more than 14.9% of the company’s outstanding ordinary shares . at such time, including for those purposes economic exposure through derivatives, swaps or hedging transactions.”

That 14.9% stake is significant, as with 15% beneficial ownership, Musk could problem tender offer. A tender offer is when a shareholder owns a controlling stake in a company and offers shareholders a premium price for their assets. This tactic is one of the ways an individual or group can fulfill hostile takeover.

So while he has never said he wants to buy Twitter, management would rather give him a seat on the board and some influence than allow that chance—at least for now. Founder and former CEO Jack Dorsey and current CEO Parag Agrawal tweeted that they approved of Musk’s appointment.

In the meantime, Musk will have to deal with the SEC. Under SEC rules, investors must report any purchase over 5 percent within 10 days. According to CNBC, Musk acquired shares on March 14, but he did not file 13G until April 5. However, the billionaire is likely to quickly settle this issue. Fines for such violations are typically only around $100,000 — nothing that would hurt Musk much.




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