SAN FRANCISCO (AP) – Billionaire Elon Musk, one of Twitter’s largest shareholders, turns the course and will no longer join the company’s board less than a week after being allocated a seat.
Twitter CEO Parag Agrawal announced the newswhich followed a weekend of Musk tweets Suggest changes to Twitter, including making the site ad-free. Nearly 90% of Twitter’s 2021 revenue came from ads.
“Elon’s appointment to the board was supposed to officially take effect on 4/9, but Elon announced the same morning that he would not join the board,” Agrawal wrote in a resubmitted note originally sent to Twitter employees. “I think that’s the best.”
Agrawal did not offer an explanation for Musk’s apparent decision. He said the board understood the risk of having Musk, which is now the company’s largest individual shareholder, as a member. But at the time, “it was thought to be the best way forward to have Elon as the company’s shop steward, where he, like all board members, must act in the best interests of the company and all of our shareholders,” he wrote.
It was just a week earlier that regulatory applications revealed that Musk had quickly accumulated a little more than 9% of the shares in the social media platform. The Mercurial billionaire had been buying shares in almost daily batches since January 31st. Only Vanguard Group’s suite of mutual funds and ETFs controls multiple Twitter stocks.
Twitter quickly gave Musk a seat on the board of directors on the condition that he owns no more than 14.9% of the company’s outstanding shares, according to a regulatory application.
Now that Musk has withdrawn from the deal, he is free to build a larger stake in Twitter, perhaps to try to take over the company or to push for a new list of executives to change its direction.
“If you want to take over a business, you’re usually in a better position to not be on the board,” said Harry Kraemer, clinical professor at Northwestern University’s Kellogg School of Management.
This is because a board member’s responsibility is to get the best value for all the company’s shareholders.
“Going on a board has a very specific responsibility to make sure you do nothing in your own personal interest,” said Kraemer, also a former chairman and CEO of Baxter International.
In a regulatory application Monday, Musk said he had “no predetermined plans or intentions” on how to use his influence on Twitter, but that he could discuss with the board and management his thoughts on potential business combinations, strategy and other matters. He added that he can express his views “via social media or other channels.”
If Musk had taken a board seat, it could have deterred him from rocking the boat too much, said Chester Spatt, a professor of finance at Carnegie Mellon University and former chief economist at the U.S. Securities and Exchange Commission.
“There’s an old cliché about keeping someone inside the tent,” Spatt said. “There were benefits to having him limited a bit.”
While Musk has been one of Twitter’s most vocal critics, the sudden resignation from the board, which became official on Saturday, could signal that the relationship between Musk and Twitter will get tougher.
“At some point, he could throw the directors out, he could replace the board,” Spatt said.
In a letter to staff announcing Musk’s departure, Agrawal wrote that “there will be distractions ahead, but our goals and priorities remain unchanged.”
Shares of Twitter Inc., which rose nearly 30% after Musk’s shareholding went public last week, were 2.8% higher Monday after swinging gains and losses through the morning.
Musk’s 81 million Twitter followers make him one of the most popular figures on the platform, competing with pop stars like Ariana Grande and Lady Gaga. But his productive tweeting has sometimes gotten him into trouble with the SEC and others.
In 2018, Musk and Tesla agreed to pay $ 40 million in civil fines and that Musk got his tweets approved by a corporate lawyer after he tweeted about having the money to take Tesla privately to $ 420 per month. That did not happen, but the tweet caused Tesla’s stock price to jump. Musk’s recent problems with the SEC could be his delay in notifying regulators of his growing share of Twitter.
Musk sent out a series of tweets before turning his course on the board seat over the weekend with reference to potential changes on Twitter.
Many of them – such as his proposal for an ad-free Twitter or turning the social media company San Francisco’s headquarters into a homeless shelter – have since been deleted.
Musk then posted a couple of cryptic tweets late Sunday, including one that showed a meme that said, “In all fairness, your honor, my client was in goblin mode,” followed by one that said “Explain everything.” Another, later tweet, was of an emoji with one hand over its mouth.
Musk has described himself as an “absolute freedom of speech” and has said he does not believe Twitter lives up to the principles of free speech – an opinion shared by supporters of Donald Trump and a number of other right-wing politicians who have had their accounts suspended for violating Twitter’s content rules.
Twitter’s CEO and many of its board members had publicly praised Musk last week, suggesting they could take his ideas seriously. But the company had made it clear that he, as a board member, could not make day-to-day decisions or change policies, such as overturning the Trump ban.