Tesla CEO, Elon Musk, has made a U-turn from his earlier decision to sit on Twitter board. Musk’s decision to back down was made known on Monday, via a statement issued by Twitter CEO, Parag Agrawal.
The new Twitter CEO said Musk had opted out of his earlier decision to join the board in the morning his appointment was to take effect.
“Elon’s appointment to the board was to become officially effective 4/9 [April 9], but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best. We have and always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input,” he said in the statement.
Parag said that the board had believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward.
What could have made Musk change his mind?
Prior to the news that he’s become Twitter’s highest shareholder with 9.2% stake, and subsequently, his appointment to the microblogging app’s board, Musk conducted a series of polls seeking Twitter users’ opinion on issues bordering on the platform’s free speech policies and the need for an edit button.
The polls came off as a suggestion, after the news of his Twitter shares and appointment to the board, that Musk was going to bring about unprecedented changes to the company. With the majority of his responders agreeing that Twitter needs an edit button and a review of policies around free speech. The belief was that in no time, Musk will usher in a new Twitter.
Thus, his U-turn has come as a shock to many. There are many theories flying around as possible reasons for Musk’s abrupt decision to quit the board. But one that comes close has to do with the agreement of being a board member.
Part of the agreement document seen by Tekedia has some bearings that Musk apparently wouldn’t want to take. According to the item 1.01 of Twitter’s Material Definitive Agreement, dated April 4,2022, “for so long as Musk is serving on the Board and for 90 days thereafter, Musk will not, either alone or as a member of a group, become beneficial owner of more than 14.9% of the Company’s stock outstanding at such time, including for these purposes, economic exposure through derivatives securities, swaps for hedging transactions.”
Weeks before he was announced as Twitter’s highest shareholder, Musk openly touted the idea of starting a social media platform where free speech will be paramount. Musk’s aim in buying a stake in Twitter is believed to be borne from a plot that will eventually see him having a controlling stake that will open the possibility of a hostile takeover.
The board had apparently seen the handwriting on the wall and didn’t want to wait for Musk to read the interpretation for them in the future, so they came up with the agreement. Musk knows what it will mean if joins the board. He will be setting his aim up to fail – so he declined at the last hour.
Thus, Musk’s rescinding his decision to join Twitter board means he now stands a chance to increase his shares in the near future, unless the board again, finds a way to stop him. It is a challenge that Parag probably acknowledged in his statement on Monday.
“There will be distractions ahead, but our goals and priorities remain unchanged. The decisions we make and how we execute [them] is in our hands, no one else’s,” he said.
