Elon Musk to join Twitter’s board after building stake

Tesla chief executive has built up a 9.2 per cent stake in the social-media company.

Tesla CEO Elon Musk is pictured as he attends the start of the production at Tesla's "Gigafactory" on March 22, 2022 in Gruenheide, southeast of Berlin. - US electric car pioneer Tesla received the go-ahead for its "gigafactory" in Germany on March 4, 2022, paving the way for production to begin shortly after an approval process dogged by delays and setbacks. (Photo by Patrick Pleul / POOL / AFP)

Twitter said it would appoint Tesla chief executive Elon Musk to its board, bringing the billionaire social-media agitator inside the fold.

The announcement Tuesday came after a flurry of calls in recent weeks between Mr Musk, Twitter CEO Parag Agrawal, and independent board chairman Bret Taylor, as company officials learned that Mr Musk was amassing a 9.2 per cent stake in the platform, a person familiar with the matter said.

The discussions culminated, according to the person, in the company offering a board seat to Mr Musk.

Mr Musk’s intentions for the company remain cloudy. In his initial disclosures related to the investment Monday, he indicated his stake would be passive.

Late Tuesday, he filed amended paperwork known as a 13D, more commonly associated with activist investors. In that form, he said he had “no present plans or intentions” to force a merger or sale, shake up the board or change the company’s dividend or share-buyback policy.

The Tesla CEO has long been one of Twitter’s most prominent users and, at times, one of its loudest critics. A self-described “free speech absolutist,” Mr Musk has publicly encouraged the platform to allow a wide range of opinions.

Mr Musk began buying Twitter shares on January 31, when the stock traded at $US36.83 ($A48.51), according to Tuesday’s filing. Those purchases continued through April 1.

Twitter shares soared over 27 per cent on Monday, after Mr Musk’s position in the company was first disclosed, and advanced 2 per cent on Tuesday, closing at $US50.98.

“He’s both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term. Welcome Elon!” Mr Agrawal tweeted.

Mr Musk tweeted: “Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!”

Mr Musk’s board term is set for two years. So long as he remains a director, he can’t own more than 14.9 per cent of the company’s stock, according to a securities filing. While neither Twitter nor Mr. Musk would give a reason for the cap, that means that Mr Musk, for now, is precluded from taking over the company outright.

The Tesla and SpaceX CEO has used the service for years to opine on everything from cryptocurrencies to free expression. That opens up a potential area of tension between the company and Mr Musk over content moderation, analysts said.

The social-media platform has suspended some users, including then-President Donald Trump in 2021, for comments made on the platform, and placed labels on posts to stop what it says is the spread of false information.

Twitter said separately on Tuesday that it would begin removing tweets posted by government or state-affiliated accounts that showed prisoners of war related to Russia’s invasion of Ukraine, citing international humanitarian law. The company also said it won’t amplify or recommend government accounts of states that limit access to free information after Moscow curtailed Western media in the country.

Last month, Mr Musk said he would only block Russian news sources from the satellite-based internet service provided by his space company “at gunpoint.” The comment came at a time many Western companies put limits on Russian media over Moscow’s invasion of Ukraine.

Later, Mr Musk tweeted a poll, saying, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” More than 70 per cent of the roughly two million accounts that voted said no.

In landing a board seat, Mr Musk will be in a position “to really kick up dirt,” said AB Bernstein analyst Mark Shmulik.

“He moved from the back seat of the car to the front seat of the car. In fact, he’s probably the driver.” Boasting more than 80 million followers, Mr Musk is a master operator on Twitter. While rivals to Tesla spend heavily on brand or product advertisement, Mr Musk effectively acts as his company’s chief marketing officer with tweets that reach audiences far beyond his immediate followers.

Mr Musk, whose regulatory filing identifies him as a passive investor, hasn’t specified what, if any, formal plans he has to change Twitter. On Monday, he asked his Twitter followers to vote on whether the company should add the ability to edit existing tweets.

On Tuesday, the company said it had been working on that functionality since last year.

“We believe one of Musk’s main motives could be to influence TWTR’s moderation policies, which he has often criticised as being too restrictive,” Brent Hill, an analyst at Jefferies wrote in an investor note, using Twitter’s stock symbol.

Any loosening of content restrictions could also backfire with advertising customers, said Brian Wieser, global president of business intelligence at GroupM, a part of ad giant WPP.

“Advertisers don’t want their brands associated with advocations for insurrection or advocations for hate and harm,” Mr Wieser said.

“They don’t want to associate with environments which create a toxicity for people who might be using the platform.”

Mr Musk hasn’t been shy about questioning Twitter’s values. After building his stake in the company, he mused publicly in recent weeks about Twitter’s commitment to free speech and even said he was considering starting a rival social-media platform of his own.

Twitter will have 12 board members, including Mr. Agrawal and co-founder Jack Dorsey. In a tweet, Mr Dorsey said that he welcomed Mr Musk onto the board.

“He cares deeply about our world and Twitter’s role in it,” Mr Dorsey wrote, adding, “I’ve wanted Elon on the board for a long time.” Mr Musk has long had a direct line to some of Twitter’s senior ranks, the person familiar with the situation said, adding that the Tesla CEO earlier relayed ideas about the company to Mr Dorsey.

Mr Musk remains on the board of at least two other companies: Tesla and rocket company Space Exploration Technologies, as SpaceX is formally known.

The manner in which Mr. Musk disclosed his investment in Twitter could flare tensions between him and the US Securities and Exchange Commission, securities lawyers say. He was late in disclosing his 9.2 per cent holding on a form that investors are required to file when they buy more than 5 per cent of a company’s stock, without planning to seek control. The filing also didn’t include a standard certification that underscores an investor’s passive status.

—Meghan Bobrowsky and Liz Hoffman contributed to this article.

The Wall Street Journal