Is Musk playing for Twitter's (TWTR) Iron Throne?
15:41, 11 April 2022
Twitter (TWTR) stock dropped overnight and then rebounded early Monday, as the market digested the latest twist in the saga that is Tesla (TSLA) CEO Elon Musk’s flirtation with the social media platform.
Twitter CEO Parag Agrawal announces Musk news in a TweetJust after 11 pm EST (UTC -5), Twitter CEO Parag Agrawal said over the platform, “Elon has decided not to join our board.” This followed a weekend of some eyebrow-raising activity from Musk over Twitter, during which he suggested transforming Twitter from an advertising-supported company to at least a partially subscription-based service, and to turning Twitter’s San Francisco-office headquarters into a homeless shelter.
(Musk deleted the homeless shelter Tweet, but not before Jeff Bezos, tweeted support for the idea.)
The Tweet was followed on Monday with an 8-K filed with the US Securities and Exchange Commission (SEC), confirming Agrawal’s announcement.
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Twitter stock price
Twitter stock rebounds
Twitter stock fell 1.08% to $45.75 from Friday’s $46.25 per share closing price, before bouncing back 4.68% to a $47.89 morning session high. Twitter stock trades on the NYSE.
“Elon Musk’s about-turn on joining the Twitter board came as something of a surprise – but perhaps we shouldn’t be too shocked,” said Capital.com analyst David Jones. “As the company’s largest shareholder with his 9.20% stake, he clearly can still wield a significant degree of influence without being tied down with the rules and responsibilities of being a board director.”
The questions now center on what Musk will do with the aforementioned 9.2% stake in Twitter. As per his prior agreement to join the board, Musk was capped from owning more than 14.9% of Twitter’s total value, and that now no longer applies, analysts were quick to point out.
“This now goes from a Cinderella story with Musk joining the Twitter board and keeping his stake under 14.9% to a likely ‘Game of Thrones’ battle in the months ahead,” said Wedbush analyst Dan Ives. “We believe the Twitter board and Musk could not come to an agreement around Musk’s communications with the public.”
What will Musk do now?
“Musk is hardly a shrinking violet when it comes to expressing his opinions both on and about Twitter. Staying as something of a free agent may actually see him being a more effective critic of the company, and better able to improve its fortunes,” added Capital.com’s Jones.
As a company fiduciary, Musk’s public comments regarding Twitter’s business would have been restricted, and the cap on his ownership stake would have prevented him from taking more hostile actions guiding Twitter’s trajectory.
“Musk no longer joining the Twitter board could lead to a host of scenarios including 1) joining up with a private equity partner and forcing major changes at Twitter and/or a sale, 2) creating more noise and angst for Twitter board/execs with various proposed platform changes, or 3) does Musk say ‘game over’, reduce his stake and go home,” added Wedbush’s Ives.
“In our opinion, it’s likely paths 1 or 2 with the Street now focused on Musk’s next poker (next filing/stake in Twitter) move in this ongoing soap opera between Elon and Twitter.”
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