Elon Musk drops Twitter board seat in new U-turn

Tesla Inc chief executive Elon Musk revealed on Monday that he had dropped plans to join Twitter Inc’s board just as his term was about to begin, the man’s latest decision. the richest man in the world who defied corporate American standards.

Musk revealed last week that he had accepted a seat on Twitter’s board, contradicting a regulatory filing he released a day earlier in which he described himself as a passive investor.

Sources told Reuters at the time that Musk asked Twitter for a board seat weeks before the social media company agreed to the arrangement.

Musk and Twitter did not disclose the reason for the U-turn. Musk said in a regulatory filing on Monday that he could now increase his 9.1% stake in Twitter or push the company to pursue transactions, although he has no such plans at this time.

There was no indication that Twitter feared a hostile bid from Musk was imminent. In announcing the development, Twitter did not disclose any shareholder rights plan, known as a “poison pill,” that would force dilution if Musk tried to increase his stake above a certain threshold.

However, Twitter chief executive Parag Agrawal warned Twitter employees in a tweet on Sunday of “distractions ahead,” a possible reference to Musk’s criticism of the company through tweets. He added that he believed Musk’s withdrawal was “for the best”.

A Twitter spokesperson did not respond to a request for comment.

Shares of Twitter rose 2.6% to $47.48 in afternoon trading in New York on Monday. They have risen more than 20% since Musk revealed his stake on Twitter on April 4. Wall Street analysts say Musk’s involvement has drawn legions of retail investors to the stock.

Securities experts have pointed out that by delaying and misrepresenting the disclosure of his Twitter stake, Musk bought the shares cheaply, saving an estimated $143 million. It’s unclear if this would be a quid pro quo for Musk, whose net worth is pegged by Forbes at $274 billion.

Musk could not be reached for comment.

Musk deleted many of the tweets he posted over the weekend on the social media platform on Monday. It is unclear what prompted the move. The tweets ranged from a call to remove the ad on Twitter to removing the letter “w” from the social media company’s name.

Jacob Frenkel, a former enforcement attorney at the U.S. Securities and Exchange Commission (SEC), said Musk’s cancellation was unconventional but didn’t appear to break any rules.

“The mere fact of being offered an offer to join the boarding tender, considering doing so and deciding not to do so is not a violation of securities laws,” a Frenkel said.

An SEC spokesperson declined to comment.

Other experts have pointed out that Musk’s public criticism of Twitter would have been difficult to reconcile with his fiduciary duties as a board administrator.

“Once on the board, most people, including activist shareholders, traditionally don’t speak in public,” said Gregory Taxin, chief executive of activist investor advisory firm Spotlight Advisors.

This isn’t the first time Musk has performed a high-profile U-turn. In 2018 he tweeted that there was “secured funding” for a US$72 billion deal to take Tesla private, but did not move forward with an offer.

He and Tesla each paid civil fines of $20 million, and Musk resigned as Tesla chairman to resolve SEC allegations that Musk defrauded investors. Musk has since challenged an agreement he made with the SEC to have some of his tweets verified by an attorney.

Securities experts have also questioned Musk’s compliance with his agreement with the SEC. In early November, Musk posted on Twitter that he would unload 10% of his stake in Tesla if users approved. A majority did, and the poll sent Tesla shares into a slump. Musk has since sold $16.4 billion worth of Tesla stock.

News of Musk joining the board last week has some Twitter employees panicking about the future of the social media company’s ability to moderate content, sources said. company at Reuters.

Charles Elson, founding director of the Weinberg Center for Corporate Governance, said Tesla, an electric car marker, and SpaceX, a space rocket developer, were already keeping Musk busy, and he would have had little time to contribute meaningfully. to Twitter as director of the board.

“Tesla shareholders should be very concerned about his involvement here because it just takes time and energy from his core business,” Elson said.

A Tesla spokesperson did not respond to a request for comment.