Elon Musk’s SEC filings reserve the right to buy a bigger stake in Twitter

Now that Elon Musk won’t be Twitter’s newest board member, that means more speculation about his true intentions and, yes, more paperwork. Musk has, once again, updated the required filing (pdf) for investors buying a significant share of a publicly traded company, in which investors must explain their intentions.

The new form confirms that any arrangement preventing Musk from trying to buy a much larger share of the company is gone, and it spells out different ways he can make his voice heard in the future. The result is a piece of evidence for anyone who suspects Musk’s overthrow has something to do with the legal requirements that come with serving on Twitter’s board.

Last week, Musk filed a Schedule 13G form with the SEC on April 4 (read here, pdf), which quickly came under scrutiny once his pending board seat was announced. been announced, as the form is intended for investors who plan to remain passive in the affairs of a company. sitting on the board of directors is not really passive.

He solved this problem with an updated Scheduled 13D document (read here, pdf) that is suitable for an “active” investor, detailing his stock purchases, and noted an agreement not to try to buy more than 14 .9% of Twitter shares. Still, the amended documents aren’t enough to clarify the question of how long he waited to disclose his stock purchases and any answer that might come from the SEC.

Musk says he currently owns 9.1% of the shares outstanding with 73,115,038. Interestingly, while he remains Twitter’s largest individual shareholder, he does not hold the largest stake in the company. Protocol points out that mutual fund The Vanguard Group revealed on Friday that it now owns 82,403,665 shares, which is enough for a 10.29% share of the company, even if the ownership is distributed among all holders of funds.

That deal with the board is over, and now the new document is here, so what’s changed? The only significant difference is Section 4, which previously contained language limiting Musk to a 14.9% stake in the company. Now that language is gone, replaced with a note about what the declarer (Musk) “could” do, and it focuses on two specific things.

What the April 5 filing said:

On April 4, 2022, the Reporting Person and the Issuer entered into a letter of agreement (the “Agreement”) which provides that: (i) the Issuer will appoint the Reporting Person to the Board of Directors of the Issuer (the “Board”) to serve as a Class II director with a term expiring at the issuer’s 2024 annual meeting of shareholders; and (ii) so long as the Reporting Person serves on the Board and for 90 days thereafter, the Reporting Person shall not, alone or as a member of a group, become the beneficial owner of more than 14.9% of the shares of the Issuer. common stock then outstanding, including for these purposes economic exposure through derivatives, swaps or hedging transactions.

What the updated filing, filed on April 11, says:

From time to time, the reporting person may enter into discussions with the Board and/or members of the Issuer’s management team regarding, including without limitation, potential business combinations and strategic alternatives, the Issuer’s business, operations, capital structure, governance, management, strategy and other questions concerning the Issuer. The declaring person may express its views to the Board and/or members of the Issuer’s management team and/or to the public through social media or other channels regarding the activity, products and service offerings of the Issuer.

In his letter to employees on Sunday evening, Twitter CEO Parag Agrawal mentioned from Musk that “we will remain open to his input,” and Elon’s letter suggests there will be plenty. How much of the discussions with the board and management versus social media thinking can determine how much of the “distraction” that Agrawal warned of actually happens.

It’s unclear what prompted Musk to inform the board on Saturday morning that he would not be joining them as a member, but it leaves his future plans unclear. In the document, Musk indicates that he has no plans to buy more shares of the company at this time (this is covered in point 4 of the new filing, as part of a series of prompts for the new shareholder), but also says that it “reserves the right to modify its plans at any time, as it deems appropriate.

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