Tesla boss Elon Musk was outed as owning almost 10 per cent of Twitter on Monday, prompting a massive run-up in shares of the company of which he is now the largest owner.
The disclosure comes close on the heels of his tweet that he was giving a "serious thought" to building a new social media platform, while questioning Twitter's commitment to free speech.
A filing showed that Musk owns 73.5 million Twitter shares, which were worth roughly $2.9 billion US based on the $39.31 share price when the stock market closed on Friday. That's a 9.2 per cent stake in the company.
On Monday morning, the price of Twitter shares rocketed on the news to more than $48, pushing Musk's stake up in the process.
Questions about Twitter's future
Musk seemingly acknowledged the news in a cryptic message on Monday, telling his 80 million followers "Oh hi lol," on — where else — Twitter.
According to a regulatory filing, Musk started acquiring shares in Twitter on March 14, exactly three weeks ago.
While it is well short of a controlling interest, Musk's stake is already raising questions about whether he will buy more of the company, or push for changes in how it operates.
"[He] is not someone that just passively puts a toe in the water," Wedbush Securities analyst Dan Ives said Monday.
"If he goes down a direction, usually goes aggressively, dives in the deep end of the pool. Musk has been clear about his criticism of Twitter and obviously he's taking it to the next level. If you can't build a social media platform, why not try to buy one?"
Brooke Erin Duffy, a communications professor at Cornell University in Ithaca, N.Y., said it's not surprising to see the social media space being a focus for billionaires like Musk.
"The key commodity of the contemporary moment is news and information," she said on Monday.
"It's the new sandbox where entrepreneurs want to play."
A prolific Twitter user, Musk has amassed 80 million followers since joining the site in 2009, and has used the platform to make several announcements, including teasing that he was going to take Tesla private at $420 a share.
No such deal was in the works, which is a big reason why he has garnered close scrutiny from regulators ever since. In October 2018, Musk and Tesla agreed to pay $40 million in civil fines and for Musk to have his tweets approved by a corporate lawyer because of that saga.
But his lawyers are now fighting to have that deal torn up.
Last month, Musk asked U.S. District Court Judge Alison Nathan to nullify the settlement agreement. His lawyer, Alex Spiro, said the Securities and Exchange Commission (SEC) has used the court agreement "to trample on Mr. Musk's First Amendment rights and to impose prior restraints on his speech."
As part of that court battle, the SEC has revealed it is also probing a Musk tweet from last November in which he asked his followers if he should sell 10 per cent of his Tesla stock to pay his taxes.
While news of the deal sent the value of the company skyward, some analysts say the move could be more trouble than it's worth for Twitter.
The company was targeted by activist shareholders Elliot Management Corp. last year because they didn't like that Jack Dorsey was CEO of Twitter but also of payment firm Square. The shareholders argued that one person couldn't fully do both jobs at once, and that Twitter was suffering because of it.
Elliot Management seemingly won that fight when Dorsey resigned as CEO of Twitter last year.
What comes next
News that Musk is now taking a stake in the company could bring similar headaches, especially if he tries to buy the whole company, or push for changes there.
"Though we don't expect the company to be taken private in the near term, this could present a challenge for new CEO Parag Agrawal, who has focused on new products to aid monetization," Bloomberg Intelligence analyst Mandeep Singh said.
"Musk's suggestions could be at odds with activists Elliott and Silver Lake, which are more focused on improving operations and free cash flow."
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2022-04-04 19:05:40Z
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