Twitter is appointing Tesla CEO Elon Musk to its board, according to a filing with the U.S. Securities and Exchange Commission. Musk will be a Class II director until 2024. It’s a type of position that can be used as an anti-takeover measure.
In a pair of tweet, Twitter CEO Parag Agrawal confirmed Musk’s new role on the board. He called Musk “both a passionate believer and an intense critic of the service” and said he would “bring great value to our board.” Musk responded via Twitter saying he looks forward “to making meaningful improvements to Twitter in the months to come!”
“The Company will appoint Mr. Musk to the Company’s Board of Directors (the ‘Board’) to serve as a Class II Director with a term expiring at the Company’s 2024 Annual Meeting of Shareholders,” reads the folder. “While Mr. Musk serves on the board of directors and for 90 days thereafter, Mr. Musk will not, alone or as a member of a group, become the beneficial owner of more than 14.9% of the shares outstanding shares of the Company at that time, including for these purposes economic exposure through the use of derivative securities, swaps or hedging transactions.
On Monday, Musk announced via an SEC filing that he had bought a 9.2% stake in Twitter, despite his complaints about free speech on the platform. Musk’s acquisition makes him the company’s largest individual shareholder. Shortly after making the disclosure, Musk asked his followers about creating an “Edit” button. Agrawal replied by tweet “The consequences of this poll will be significant,” and he warned users to “vote carefully.”
Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in the months to come!
— Elon Musk (@elonmusk) April 5, 2022
Jack Dorsey, the former CEO of Twitter, said he was “happy” to have Musk join Twitter’s board, citing that “he cares deeply about our world and Twitter’s role in it.” Dorsey stepped down as CEO in November 2021, but will remain on the board until May.
I’m really happy that Elon is joining the Twitter forum! He cares deeply about our world and Twitter’s role in it.
Both Parag and Elon lead with their hearts, and they will be an incredible team. https://t.co/T4rWEJFAes
— jack⚡️ (@jack) April 5, 2022
As CNBC noted, Musk’s investment could trigger more issues with the SEC. The SEC requires anyone with more than 5% equity in the company to disclose their purchase within 10 days. Musk first acquired the shares on March 14, 2022 and did not reveal this information until April 4, 2022, 21 days after the fact. According to CNBC, SEC fines for this type of violation are generally not exorbitant (at least for the richest man in the world) and tend to hover around the $100,000 mark.
Another issue could relate to the way he announced the stock purchase, with a Schedule 13G filing instead of selecting the more complicated 13D. The difference is that anyone acquiring more than 5% of a company’s stock is required to register it, and according to Investopedia, Form 13D includes questions about plans “involving a merger, reorganization, or liquidation of the issuer or one of its subsidiaries. The simpler Form 13G does not ask these questions, however. It is intended for use when investors “do not intend to influence control of the issuer”, and serving on the board suggests that is not the case. Filing the forms incorrectly could result in a fine from the SEC.
Musk has clashed with the SEC several times over the content of his tweets. In 2018, the SEC sued Musk for tweeting that he had “secured funding” to take Tesla private. A judge then ordered a lawyer to approve Musk’s tweets before he published them. The SEC is currently investigating Musk for his tweets asking users to sell 10% of his Tesla stock.
Updated April 5 at 10:17 a.m. ET: Added information regarding Musk’s SEC filing.