Elon Musk takes surprise 9pc stake in Twitter, sending shares higher

Tesla CEO in recent weeks has said he was considering starting a rival social-media company of his own.

Billionaire Elon Musk has disclosed a 9.2 per cent stake in Twitter. Picture: Getty Images

Elon Musk disclosed a 9 per cent stake in Twitter, turning one of the social-media company’s most famous users into its largest shareholder.

The surprise move sent Twitter’s stock up 27 per cent Monday, its largest one-day percentage gain on record. Still, little is known about Mr Musk’s intentions. The Tesla chief executive has previously revelled in the attention from his more than 80 million Twitter followers, and criticised the service broadly.

In a securities filing Monday, Mr Musk reported owning almost 73.5 million shares of Twitter as of March 14, representing a stake valued at $US2.9bn based on Friday’s closing price. That gives Mr Musk more Twitter shares than even the company’s co-founder and former CEO Jack Dorsey, as well as large investors such as the Vanguard Group.

Mr Musk’s arrival as an investor adds a jolt to what has been a social-media platform that has at times struggled to deliver growth. The outspoken entrepreneur hasn’t been shy about questioning Twitter’s values. In recent weeks, he has mused publicly about its commitment to free speech and has said he was considering starting a rival social-media platform of his own.

It also raises questions about Mr Musk’s plans with Twitter. After he took a stake in the company, he tweeted that he had been “giving serious thought” to creating a new social media platform, without disclosing specifics. Mr Musk hasn’t said how he would juggle such an effort along with running Tesla, rocket company SpaceX and his other endeavours.

On March 25, 11 days after becoming the largest shareholder in the social-media company, Mr Musk tweeted a poll, saying, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” He added in a follow-up tweet: “The consequences of this poll will be important. Please vote carefully.”

More than 70 per cent of the roughly two million people who responded voted no.

Mr Musk and Twitter didn’t respond to requests for comment. The type of regulatory form Mr Musk used to disclose his stake marks him as a passive investor with no intention to change or influence control of the company.

“There’s no such thing as a passive stake with Elon Musk,” Cascend Securities analyst Eric Ross said. “He’s clearly going to roll his sleeves up.”

Mr Musk didn’t offer any clarity on his reasons or plans for the purchase on Monday morning and tweeted only, “Oh hi lol.”

Later Monday he tweeted, “Do you want an edit button?,” a function many Twitter users have long requested.

Twitter has shrugged off pressure before. Activist investor Elliott Management Corp. took a stake in the company two years ago, nominated four directors to its board and pushed for the replacement of Mr Dorsey. Mr Musk tweeted in support of Mr Dorsey using a heart emoji. Twitter and Elliott later struck an agreement to keep Mr Dorsey in place, though Mr Dorsey later resigned, saying the company had outgrown its founders.

Twitter late last year named Parag Agrawal, previously the company’s chief technology officer, its new CEO.

Mr Musk is the world’s richest person, with a net worth of $US273bn as of Monday, according to the Bloomberg Billionaires Index.

In recent years, Twitter and Meta Platforms’ Facebook and Instagram have faced criticism over how they handle content on their platforms. Some people have accused the companies of censoring speech, while others say they don’t do enough to moderate content on their platforms that can lead to harm.

Twitter last year permanently banned the account of then-President Donald Trump following the January 6 attacks on the US Capitol, citing concerns about incitement to violence. The move drew condemnation from some supporters of Mr Trump. Some conservatives took to Twitter Monday expressing the hope Mr Musk’s ownership stake would lead that decision to be overturned.

Mr Musk has complained on Twitter about some instances where companies have moved to remove content from their platforms. In one instance he blasted Amazon.com for restricting the sale of a self-published ebook that questioned whether the Covid-19 virus is as deadly as public health experts were saying at the time. Amazon later restored the book, saying it was blocked in error.

Mr Musk has taken aim at the software that the big platform providers use to surface content to their users. These algorithms commonly encourage users to spend more time on the platform and, in turn, to view more advertisements.

Some politicians say those algorithms can affect how people form opinions and make decisions in the real world. The companies say their software is designed so users enjoy their experiences.

Mr Musk polled his Twitter followers on March 24, asking them whether “Twitter algorithm should be open source,” referring to software that is publicly accessible. Mr Dorsey then retweeted Mr Musk’s poll, saying, “The choice of which algorithm to use (or not) should be open to everyone.”

“Any of these social networks need to make a decision about how their algorithms are going to prioritise some speech over others,” said Nate Persily, director of the Stanford Cyber Policy Center. Otherwise, he said, “bad actors will manipulate the platform and harm the user experience.”

Twitter faces a host of competitors with looser content controls, though they have developed only modest followings. Parler launched in 2018, billing itself as an unbiased, free-speech alternative to larger social platforms, and this year former President Donald Trump’s Truth Social emerged as another potential rival.

“It looks like he is late,” said Howard E. Berkenblit, a partner at law firm Sullivan & Worcester. “Ten days is 10 days. It happens, but he is a little more high-profile than your average 5 per cent holder.”

The SEC in 2014 brought enforcement actions against some people who missed ownership-disclosure deadlines repeatedly. Mr Musk likely won’t face a penalty over the late filing, Mr Berkenblit said, partly because he said he doesn’t plan to seek management or board changes at Twitter, which would have elevated the filing’s importance.

Mr Musk has long been active on Twitter, sharing information about his businesses including electric-vehicle maker Tesla, rocket company Space Exploration Technologies Corp., as SpaceX is formally known, and tunneller The Boring Co.

In a now-infamous 2018 tweet, Mr Musk said he was considering taking Tesla private and had secured funding at $US420 a share. That sent the stock surging and prompted an investigation by the Securities and Exchange Commission, which found that Mr Musk had never discussed the specifics of such a going-private deal.

Mr Musk and Tesla settled the SEC lawsuit in 2018 by each agreeing to pay $US20m, and Mr Musk stepped down as chairman. He also agreed to clear tweets that were deemed material to Tesla shareholders beforehand with Tesla’s lawyers. Last month he asked a federal judge to scrap a settlement with regulators about the 2018 incident.

He has also used Twitter to publicly attack the SEC.

The Wall Street Journal