Elon Musk’s SEC applications reserve the right to buy a larger stake in Twitter

Now that Elon Musk is not becoming the new member of Twitter’s board, that means more speculation about his true intentions and, yes, more paperwork. Musk has again updated the required filing (pdf) for investors buying a significant portion of a listed company where investors need to explain their intentions.

The new form confirms that any event that blocks Musk from trying to buy a significantly larger stake in the company is gone, and it describes various ways in which he can make his voice heard in the future. The result is a piece of evidence for anyone who suspects Musk’s overthrow had anything to do with the legal requirements that would come with serving on Twitter’s board.

Last week, Musk submitted a Schedule 13G form to the SEC on April 4 (read here, pdf), which quickly came under scrutiny when his pending board position was announced because the form is for investors planning to remain passive in a company Affairs – Taking a board seat is not exactly passive.

He cleared up this issue with an updated Scheduled 13D document (read here, pdf), appropriate for an “active” investor, detailing his stock purchases and noting an agreement not to attempt to buy more than 14, 9 percent of Twitter shares. Still, the amended applications are not enough to clear up the question of how long he waited to reveal his stock purchases and any response that might draw from the SEC.

Musk says he owns 9.1 percent of the outstanding stock right now with 73,115,038. Interestingly, while he remains Twitter’s largest individual shareholder, he does not own the largest stake in the company. Protocol points out that The Vanguard Group fund on Friday revealed that it now owns 82,403,665 shares, which is enough for a 10.29 percent stake in the company, even though the ownership is distributed among all fund holders.

That board agreement is off and now the new document is here, so what’s changed? The only significant difference is Section 4, which previously contained the language restriction of Musk to a 14.9 percent stake in the company. Now the language is gone, replaced by a note indicating what the reporting person (Musk) “might” do, and it focuses on two specific things.

What the case said on April 5:

On April 4, 2022, the Reporting Person and the Issuer entered into a letter agreement (the “Agreement”) which provides that: (i) The Issuer will appoint the Reporting Person to the Issuer’s Board of Directors (the “Board”) to act as Class II Director with a period expiring at the issuer’s annual shareholder meeting in 2024; and (ii) as long as the reporting person sits on the board and for 90 days thereafter, the reporting person will not, either alone or as a member of a group, become the beneficial owner of more than 14.9% of the Issuer’s ordinary shares outstanding on such a time, including for these purposes financial exposure through derivative securities, swaps or hedging transactions.

What the updated file says, registered on April 11:

From time to time the reporting person may enter into discussions with the Board of Directors and / or members of the Issuer’s management team relating to, including, without limitation, potential business combinations and strategic alternatives, business, operations, capital structure, management, leadership, strategy of the Issuer and other matters relating to the Issuer. The reporting person can express its views to the Board of Directors and / or members of the Issuer’s management team and / or the public through social media or other channels with respect to the Issuer’s business, products and services.

In his letter to employees Sunday night, Twitter CEO Parag Agrawal writes said of Musk that “we will remain open to his input,” and Elon’s letter suggests that there will be plenty of it. How much of what comes up in discussions with the board and management versus pondering on social media can determine how much the “distraction” Agrawal warned about actually happens.

It is unclear what prompted Musk to inform the board Saturday morning that he would not join them as a member, but that leaves his future plans unclear. In the document, Musk states that he does not plan to buy more shares in the company right now (it is covered by point 4 of the new application, as part of a series of calls for the new shareholder), but also says that he “reserves reserves the right to change his plans at any time he deems appropriate. “

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