Last week people like me spent a lot of time writing about this Elon Musk becomes Twitter’s largest shareholder, hold a seat on the board, and in general the future of the company in uncertainty. Musk’s trickster god persona seemed to herald a new period of chaos for Twitter after a few years of relative calm, and indeed he spent the weekend tweeting different crazy ideas about the company that would have landed fewer employees in a meeting with HR.
But you can know you’re dealing with a top-notch Chaos Muppet, and still find yourself unprepared for the next turn of events. And indeed, I found myself unprepared for the development that turned the schedule upside down on Sunday evening: Musk is not going to join the board after all and had already decided against it In front He spent the weekend posting about whether Twitter (for example) change its name to Titter.
The news came straight from Twitter CEO Parag Agrawal, whose life used to be much simpler. In a tweeted screenshot Agrawal wrote:
The board and I have had many discussions about Elon joining the board and directly with Elon. We were excited to work together and understand the risks. We also felt that having Elon as a trustee of the company where he, like all board members, must act in the best interests of the company and all of our shareholders is the best way forward. The board offered him a seat.
We announced on Tuesday that Elon would be appointed to the board, pending a background check and formal acceptance. Elon’s appointment to the board was scheduled for April 9th. officially come into effect, but Elon announced on the same day that he would no longer be joining the board. I think that’s the best. We have and always will value the input of our shareholders, whether they are on our board of directors or not. Elon is our largest shareholder and we remain open to their contributions.
Musk’s revolving door trip through the Twitter boardroom raises two obvious but as yet unanswerable questions: What has changed? And what happens next?
Let’s take them in turn.
Agrawal’s tweeted explanation for Musk’s change of heart offered several tantalizing clues as to what could has happened. For example, there’s the emphasis on a board member’s fiduciary responsibility to shareholders, a responsibility Musk has so far shown no interest in. It’s commonly understood (and correctly, in my opinion) that Musk bought 9.2 percent of Twitter primarily for fun. As a board member, Musk would not have represented the interests of the common shareholder, or at least the markets, by tweeting like “Twitter is dying?” And I can imagine that over the past few days it has become clear to him that this would actually be a permanent legal obligation and would be absolutely no fun, and that was it.
This may have been particularly pressing for Musk given that he already seems to be dealing with so many legal issues, including some related to his large involvement in Twitter. For example him late filing of a form showing he had exceeded 5 percent ownership with the Securities and Exchange Commission as requiredwhich allowed him to acquire 4 percent more of the company at a much lower price than he would have had had the world known he was on the way to becoming Twitter’s largest single shareholder.
Securities experts told That Washington Post that Musk saved himself $156 million as a result. At this point, it seems pretty clear that Musk doesn’t care about saving $156 million on a purchase, but it also seems like something the SEC will definitely investigate and potentially fine him. And given the different Miscellaneous Things the SEC is currently investigating him forMusk had all the more reason not to put himself in a position where he would constantly flout their rules.
(It’s also – likewise? – likely that the potential for another SEC conflict meant nothing to Musk; he hardly ever did uncomfortable through his previous disputes with the SEC. But if you’re trying to imagine that rational self-interest played a part in this weekend’s events, you’d probably assume it’s the specter of ramped enforcement of one sort or another.)
The funniest and least believable implication in Agrawal’s tweet is that Musk didn’t take the board seat because he refused to take a background check. It’s incredible because of all the musky related material already present in the foreground: smoking weed on Joe Rogan’s podcast, scoff at the use of alternative pronounsto have a secret baby with grimesthe fact that Tesla is the issue now the largest racial discrimination lawsuit ever filed by California. A background check would show up… what exactly? That he knocked over a 7-11?
Personally, I tend to think Musk will have that required a background check so he could tweet the full, unedited PDF of all the results with the caption “LMAO” rather than turn down a board seat because of it.
In any case, the mood on Twitter today is one of exhausted relief. There was strong internal opposition to his board seat, for some of the reasons I mentioned in my quick foreground check above. Musk’s attitude toward the company has been almost entirely antagonistic, rife with criticism of its content moderation policy, its lack of an edit button, and, um… the decision not to use the company headquarters as a shelter for the homeless.
Many Twitter employees are justifiably proud of the steps they’ve taken in recent years to reduce abuse and harassment on the platform, including flagging tweets containing misinformation and removing accounts that violate the violation of guidelines. To them, Musk’s hasty exit from the boardroom probably feels like a dodged bullet.
“I’ve stayed silent since the announcement because I wanted to give Twitter leadership an opportunity to do the right thing about their employees, and they did.” said Rumman Chowdhury, who leads the machine learning company’s ethics, transparency and accountability team. “Thanks.”
Now let’s move on to the even more elusive question: what’s next for Twitter? Agrawal hinted that more shoes need to be dropped: “There will be distractions,” he said in his note. So let’s look at the multiverse.
There’s a world where Musk buys a lot more Twitter stock; He is no longer bound by an agreement with the board to limit his investment to less than 15 percent of the shares. Since I’m already the company’s largest single shareholder, I don’t realize that unless he genuinely wants to conduct a hostile takeover, he would gain much by significantly increasing that stake. That would be difficult thanks to “poison pill” provisions in Twitter’s bylaws, as Ben Thompson explains. But I imagine that won’t stop Musk.
There’s a world where Musk decides he’s had enough of his little Twitter adventure and sells most or all of his stock. That’s what former Microsoft CEO Steve Ballmer did after acquiring 4 percent of Twitter a few years ago; after that he admitted The experience of owning Twitter stock was so bad that he stopped investing in individual stocks altogether.
Finally, there’s a world where Musk maintains the size of his Twitter position, but constantly tweets edgelord content about how bad Twitter is, along with memes about how everyone should tweet 69 times on April 20th or whatever. This strikes me as the most likely short-term outcome, as it allows Musk to achieve his primary goal of having a Twitter stake (having fun) while avoiding further entanglements with the SEC. This approach has the added benefit of further increasing Twitter’s market value – see Matt Levines Elon Markets hypothesis — which, as long as Musk cares about the value of everything he owns, is undeniably good for him.
In the end I still think the activist investors who joined Twitter’s board of directors in 2020 and likely contributed to Jack Dorsey’s unexpected departure as CEO in November. They have set big, potentially unattainable goals that Agrawal must now meet – including 100 million users.
If Twitter doesn’t hit that mark, Elliott Management Corp. come back and look for fresh blood? And if they do, will they find an ally in Musk – or will his seemingly amicable relationship with Agrawal and Dorsey serve as a shield against another attack?
Whatever the answers, I imagine the dynamic will continue to change until that moment comes. Musk won’t be joining Twitter’s board of directors, but a board seat has never been the source of his true influence on Twitter. For Musk, as for anyone else, the platform’s true power lies in its ability to tweet whatever you want, whenever you want.
When Musk turned down the board seat, it seems Musk got exactly what he wanted.
https://www.theverge.com/2022/4/12/23021248/elon-musk-twitter-troll-board-seat-fiduciary-vs-fun How Elon Musk got everything he wanted out of Twitter