Elon Musk, Twitter’s largest investor, is reversing course and will no longer serve on the company’s board of directors, less than a week after being appointed.
Twitter CEO Parag Agrawal confirmed the revelation, which came after Musk suggested changes to Twitter in a series of tweets over the weekend, including making the service ad-free. Ads will account for over 90% of Twitter’s earnings in 2021.
“Elon Musk’s appointment to the board was scheduled to become officially effective on 4/9, however, Elon announced that same morning that he would not be joining the board,” Agrawal said in a republished message originally sent to Tesla staff. “I think it’s for the best.”
Elon Musk’s apparent decision was not explained by Agrawal. He stated that the board was aware of the hazards of having Musk, the company’s largest shareholder, as a member. However, he stated that at the time, “we believed that having Elon Musk as a fiduciary of the firm, where he, like all board members, had to act in the best interests of the company and all our shareholders, was the best road ahead.”
Elon Musk’s volatile relationship with Twitter began exactly one week ago when regulatory filings revealed the mercurial billionaire had amassed a 9.2 percent stake in the social media company. According to a later financial filing, Musk began purchasing the shares in practically daily batches on January 31.
According to a regulatory filing, Twitter granted Musk a seat on the board on the condition that he does not control more than 14.9 percent of the company’s outstanding stock.
Musk’s board position could have made him a “thorn in management’s side” and give him an influential inside voice in the platform’s future, but it could also have discouraged him from rocking the boat too much, according to Chester Spatt, a finance professor at Carnegie Mellon University and former chief economist at the United States Securities and Exchange Commission.
“There’s an old adage about keeping someone inside the tent,” Spatt explained. “There were benefits to having him restrained a little.”
While Musk has been one of Twitter’s harshest critics, his unexpected resignation from the board, which became effective on Saturday, may signify a deterioration in ties between Musk and Twitter.
Musk, as the business’s largest shareholder, could potentially “swing back hard” at Twitter executives and board members, forcing the company to choose a different path, according to Spatt.
“At some point, he could fire the directors and replace the board,” Spatt said. “With his present 9 percent investment, he could undoubtedly launch that and perhaps be quite successful.”
Agrawal wrote in a message to staff announcing Musk’s leaving, “There will be diversions ahead, but our goals and priorities remain intact.”
Twitter Inc. shares slipped about 2% at the outset Monday, after jumping over 30% after Musk’s investment became public last week.
Late Sunday, Musk sent out a few mysterious tweets, including one with a meme that said, “In all fairness, your honor, my client was in goblin mode,” followed by another that said, “Explains everything.” The following tweet depicted an emoji putting its palm over its mouth.
Musk’s 80.5 million Twitter followers rank him among the most popular individuals on the platform, rivaling music singers such as Ariana Grande and Lady Gaga. However, his proclivity for tweeting has occasionally landed him in hot water.
In one notable case, Musk apologized to a British cave explorer who claimed Musk had branded him a pedophile in an angry — and later deleted — tweet by referring to him as “pedo man.” Musk filed a slander suit, but a Los Angeles jury later cleared him.
He’s also been embroiled in a long-running legal battle with the Securities and Exchange Commission over his Twitter behavior. Musk and Tesla agreed in 2018 to pay $40 million in civil fines and have Musk’s tweets authorized by a company counsel after he tweeted that he had enough money to take Tesla private at $420 per share. Although this did not occur, the tweet led Tesla’s stock price to rise. Musk’s lawyer has claimed that the SEC is violating his free speech rights.
Musk’s current fight with the SEC may stem from his failure to tell regulators of his growing ownership of Twitter.
“He’s a serial violator of SEC regulations,” said Spatt.
Before resigning from his board seat, Musk put out a series of tweets over the weekend addressing future changes at Twitter.
Many of them, including his plan for an ad-free Twitter and converting the social media company’s San Francisco headquarters into a homeless shelter, has subsequently been removed.
Musk then sent out a few mysterious tweets late Sunday, including one with a meme that said, “In all fairness, your honor, my client was in goblin mode,” followed by another that said, “Explains everything.” The following tweet depicted an emoji putting its palm over its mouth.
Musk has described himself as a “free speech absolutist,” and has stated that he does not believe Twitter is upholding free speech principles — an opinion shared by followers of Donald Trump and a number of other right-wing political figures whose accounts have been suspended for violating Twitter content rules.
Last week, Twitter’s CEO and many of its board members openly complimented Elon Musk, implying that they might take his ideas seriously. However, the company had made it clear that as a board member, he would be unable to make day-to-day decisions or change policies, such as overturning Trump’s ban.
Since taking leadership from co-founder Jack Dorsey in November, Agrawal’s initial moves have consisted of reorganizing departments without making big changes. The company has historically trailed its social media competitors and has considerably fewer users.
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