Elon Musk recently bought a 9.2% stake in Twitter, according to a filing Monday, making him the company’s largest shareholder.
Purchase news sent Twitter shares
(TWTR) Up 22% in early trade. Musk did not disclose what he paid for the shares, but his stake was $2.9 billion as of the end of trading Friday, and $3.5 billion after rising early Monday.
Musk’s filing did not reveal the purpose of the purchase or any plans for the company. But he has been a major critic of Twitter’s policies in the past. Last month he said he was giving “serious thinkingTo create a new social media platform.
“Given that Twitter serves as a de facto public square for the city, failure to adhere to the principles of free speech fundamentally undermines democracy,” Musk chirp Last month. “What needs to be done?”
Any time an investor purchases 5% or more of a company’s stock, they must disclose the purchase on file with the Securities and Exchange Commission. Although a stake of less than 10% in a company is considered “negative” in the eyes of Wall Street, it may indicate Musk’s efforts to take a more active role in how Twitter is run. This is one of the factors that prompted other investors to buy the shares and raise the price early on Monday.
“I think he intends to be active and force change on Twitter,” said Dan Ives, technical analyst at Wedbush Securities. “This is a shot across the arc of the Twitter board and management team to begin discussions.”
Ives said that even if Musk doesn’t try to change the way Twitter operates, his big purchase could prompt some other activist investors to buy a stake in the company.
“One way or another, it’s going to change the trajectory of Twitter,” Ives said.
It might not be realistic, Ives said, for Musk or anyone else trying to start building a new competition platform from scratch. Thus, it makes sense for him to try to change practices in Twitter itself.
Twitter had no immediate response to a request for comment on Musk’s investment.
Musk has 80 million followers on Twitter, which is far more than any other CEO. He tweets frequently, using it as a primary form of spreading news about all of Tesla
(TSLA) and SpaceX, the two companies he heads, neither of which has the traditional PR department of the other companies.
But his tweets sometimes got him into trouble.
In 2018, Musk tweeted that it would be Take a private Tesla at $420 a share, and that he had secured “secured financing” to do so. It turned out later that while he was doing Discussions about financing Such a bid, funding was by no means secured.
musk settle the case By relinquishing his role as Tesla’s chairman, even though he remains its CEO. Both he and Tesla paid a $20 million fine as well, with Musk reimbursing the company for its payments by buying an additional $20 million of Tesla stock.
He also agreed that any of his future tweets that might contain material information about the company would be reviewed by other Tesla executives before they were sent. The Securities and Exchange Commission has questioned whether he is complying with this provision of the agreement, and Musk and the agency are fighting over the issue in court.
Twitter founder Jack Dorsey Stepping down as CEO Last November in a sudden movement without prior notice is usually presented with this type of change of leadership. He was succeeded by Parag Agrawal, who was serving as Director of Technology.
Musk had expressed Dorsey support In the past when he faced criticism from some shareholders. And when Agrawal was first named CEO of Twitter, someone else tweeted the fact that Google, Microsoft, Adobe, IBM, Palo Alto Networks and Twitter are all run by CEOs who grew up in India, Musk responded himself. tweet: “The United States benefits greatly from Indian talent!”
But after a few days, he tweet meme This equates Agrawal with former Soviet leader Joseph Stalin and portrays Dorsey as a former Stalin confident that the dictator was later assassinated.
“Musk has already indicated that he does not agree with Agrawal’s appointment and that he would like some changes,” Morningstar analyst Ali Al Maghribi said in a note to clients. “This creates more uncertainty about how Agrawal and the company will respond to the company’s largest shareholder now.”
Unlike Musk, who owns more than 20% of Tesla, Dorsey’s stake in Twitter is relatively modest, with only 2.3% of the company’s shares.
Ives said Musk does not necessarily need to become the CEO of Twitter to be able to persuade the company to change its practices. It is not entirely clear what changes he would like to see.
He recently ran a Twitter poll asking his followers if they think Twitter adheres strongly to the principle of free speech – 70% said no – and another poll asking if its algorithms should be open source – 83% answered yes. Both surveys attracted over a million responses.
But the kind of changes that Musk might advocate for Twitter may differ significantly from those that a traditional active investor might seek, typically related to a company’s share price increase.
Twitter has encountered active investors before. Hedge fund Elliott Management Pushed in 2020 to make changes to the platform, including potentially firing Dorsey or insisting he step down from a separate CEO position he once had at payments technology company Square
(square foot). Dorsey survived this challenge but eventually decided to quit Twitter after more than a year.
Twitter has become a target of critics on both sides of the political divide. Some believe the platform has not done enough to combat misinformation about Covid-19 and alleged election fraud. Others believed that it was a mistake to censor some viewpoints, including Ban Former President Donald Trump.
Twitter’s $31.5 billion market capitalization is a small part of what companies like Tesla or rival social media giant Meta, owner of Facebook and Instagram, are worth. Twitter’s stock has lost more than half of its value since February 2021, when the company reported this Efforts to tackle misleading content About US elections The platform costs some users.
Ives said it would still be too expensive to buy the Twitter holder alone, especially since most of his fortune is tied to his holdings of Tesla and SpaceX stock. Musk is the richest person in the world, with an estimated net worth of $288 billion, according to Forbes.
“He had to partner with private equity firms,” Ives said. “It’s not like he can do it himself.”
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