Refusing to join Twitter's board, why did Musk change his mind?

According to foreign media reports, less than a week after Musk announced his joining Twitter's board, the "rich and willful" tech maniac has undergone a dramatic reversal. Twitter said on the 11th that Musk has decided not to join the company's board of directors. The news not only stirred up turmoil on Wall Street, but also reignited speculation about Musk's intentions to buy Twitter. ”

Unexpected reversal

Parag Agrawal, CEO of the US social media company Twitter, said on the 11th that Musk has decided not to join the company's board of directors. This sudden reversal came as a surprise to the outside world.

According to Twitter's filing with the U.S. Securities and Exchange Commission (SEC) on the 6th, Musk will join Twitter's board of directors for a term until 2024.

However, the documents submitted to the SEC after the update on the 11th show that Musk said on the 9th that he relinquished his position as a director of Twitter.

Musk now holds a 9.2 percent stake in Twitter and is the company's largest individual shareholder, the filings show. He has no plans to buy more Twitter shares at the moment, but his purchases will be unrestricted.

According to SEC regulations, if Musk joins Twitter's board, its shareholding cap cannot exceed 14.9%.

The filing also alleges that Musk may be involved in discussions with the management team of Twitter's board, including but not limited to potential business mergers, strategic shifts, businesses, operations, capital structures, governance, management, and other matters related to Twitter. Musk can also provide advice on Twitter's business, products and services through social media or other channels.

Most analysts believe that after refusing to "join the club", Musk may increase his stake in Twitter and eventually try to establish control over Twitter.

Musk himself remained relatively silent about the specific reasons for not joining. Musk reportedly sent a mouth-covering emoji on Twitter after the announcement, but it was removed hours later.

The news immediately caused a storm on Wall Street. Before U.S. stock marketing on Monday, Twitter fell more than 6%.

After news of Musk's twitter holdings of more than 9% was made public last week, Twitter jumped 27%. The stock price rose again after Twitter announced that Musk would join the board.

Industry insiders expect that given that there is still a lot of uncertainty in the future, Twitter's stock price may continue to fluctuate.

Remove the "shackles"?

Analysis of all parties pointed out that considering Musk's large shareholding ratio, a major factor in refusing to "join" may be his desire to maintain flexibility in investment and decision-making.

Jay Clayton, former chairman of the SEC, said: "When you enter a company's board, your freedom as an investor is limited. You need to be involved for a long time and act in conjunction with other directors and managers, which really limits your freedom to do business. ”

In addition, working on the board means musk will have access to "important, market-impacting confidential information." Clayton said the information would further limit Musk's ability to buy and sell stocks or other securities.

Wells Fargo analyst Brian Fitzgerald speculated: "I think Musk has realised that if he joins Twitter's board, his voice will be weakened, which is definitely the last thing he wants to see." ”

Musk is the "traffic bearer" on Twitter, with more than 81 million followers. However, his tweets also carry a lot of risks.

In 2018, Musk agreed to reach a $20 million settlement with the SEC over tweets related to "Tesla privatization." The settlement stipulates that Tesla needs to have someone to supervise Musk's tweets.

Some commentators said that becoming the largest shareholder outside the board of directors means that Musk can remove the "shackles" and publicly pressure Twitter to make changes.

Musk has recently made bold remarks on Twitter, saying that "Twitter is dead." He also suggested that Twitter revise the "edit" function and conduct polls on fans, seemingly intending to pursue a sweeping reform.

Power struggle

For Twitter, the initiative doesn't seem to be in its own hands, and the door to hostile takeovers may have opened.

Don Bilson, an analyst at Gordon Hascott Research Consultants, said that while Twitter no longer has to worry about Musk casually revealing its board decisions, on the other hand, Twitter has to deal with a fickle, personality-blowing outside investor. "Twitter is now in a state of suspense," Pilsner said.

Angelo Zino, an analyst at the Center for Financial Research and Analysis (CFRA), said: "Musk's actual investments are only a small fraction of his wealth and do not rule out the possibility of a full-fledged acquisition of Twitter. ”

Dan Ives, an analyst at Wadebush Securities, shares a similar view. He believes that Musk's no longer seeking to join the board will set off a "power game" battle between him and Twitter, and musk is likely to take more hostile action against Twitter to further accumulate his stake in Twitter.

However, some people believe that as the head of SpaceX and Tesla, taking over Twitter is not Musk's top priority.

Gene Munster, managing partner of Loup Ventures, a Silicon Valley venture capital firm, said that for Musk, taking over Twitter was a huge opportunity on a par with traffic electrification and space travel, but it was "just one of many things he's in charge of."

There are also arguments that Musk's extraordinary strength, wealth and unpredictability may bring more profits to Twitter, but it is also a "dangerous investor."

The BBC said there were already concerns within Twitter about what kind of impact Musk would have on the company's future. "To be sure, he wants to change Twitter, and what's uncertain is what he's going to do next."

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