- Billionaire Elon Musk spent more than $2.6 billion in 2022 to become Twitter’s largest single shareholder.
- For this, he was offered a seat on the company’s board of directors. After initially accepting, he later declined the role.
- So why this sudden change of heart?
Six days ago, Twitter CEO Parag Agrawal announced the appointment of billionaire Tesla CEO Elon Musk to Twitter’s board of directors.
It came just a day after Musk disclosed a nearly 10% stake in Twitter – an investment of more than $2.6 billion that made Musk the social media company’s largest single shareholder. .
“Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in the months to come!” Musk tweeted in response at Agrawal’s announcement.
Less than a week later, Agrawal made another announcement: Musk “has decided not to join our board of directors,” he said.
Notably, Musk had publicly declared his intention to join Twitter’s board of directors just minutes after Agrawal’s original tweet on April 6. He was due to be appointed to the board on Saturday, April 9, but instead told Agrawal that morning he “wouldn’t be joining the board again.”
Musk has yet to say why, and he did not immediately respond to a request for comment.
Given its substantial investment in Twitter, one consideration could be its flexibility.
“When you’re on the board of a company, your degrees of freedom as an investor are significantly limited,” former SEC Chairman Jay Clayton told CNBC Monday morning. “To put an end to this, you’re in it for the long haul and you’re in it with your other directors and officers — and that limits your freedom of action,” he said.
In addition, serving on a board of directors allows you to have access to “important and evolving confidential information in the market”.
This information would have further restricted Musk’s ability to “enter and exit a stock or other security,” Clayton said.
As a condition of his appointment to the board, Musk would have had to limit his stake in Twitter to 14.9%. Now, since he’s not joining the board, that restriction no longer exists, meaning Musk is now free to potentially buy Twitter.
“It now ranges from a Cinderella story with Musk joining Twitter’s board and keeping his stake below 14.9%, helping Twitter move forward strategically, to probably a ‘Game of Thrones’ battle between Musk and Twitter,” Wedbush analyst Dan Ives told Insider.
Musk is no stranger to voicing his thoughts on how to change Twitter.
He criticized the way Twitter moderates its users, including the permanent ban of former President Donald Trump, in what he considers as an attack on freedom of expression. He criticized the lack of spambot moderation on Twitter, which he repeatedly lamented as a platform”most annoying problem.” And he criticized Twitter’s ability to maintain relevance — a review he aired on Saturday morning, the same day he declined the board nomination.
This is also another possible reason Musk hasn’t served on Twitter’s board: Maybe he just wants the freedom to review a service he likes and uses regularly without having to facing the board of directors of this company.
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