The world’s richest man and one of corporate America’s boldest personalities, Elon Musk, recently acquired the largest stake in one of the world’s most popular social media platforms – Twitter. That’s right: The Tesla and Space X founder took a 9.2% stake in the company worth $2.89 million.
Moreover, on 5th April 2022, Musk announced he would also be joining the board of directors, which raised many questions regarding what he could do and could not do in the company. In this article, I’ll dive deeper into Elon Musk and his Twitter stock buy, including his role and the possible reasons for this incredibly lucrative endeavor.
What Elon Musk Can’t Do as a Passive Investor on Twitter
Acquiring 9.2% of the company’s stock meant that Elon would be a passive investor. Thus, he doesn’t have an active role in decision-making or running any aspects of its operations. Moreover, according to a preset proviso, he can’t increase his shares above 14.9% until his initial term as a director ends in 2024.
What Musk Can Do Now
After becoming a key stakeholder in Twitter, along with 11 other directors, Musk can steer the company’s business strategy and be a part of key financial decisions, including the CEO’s paycheck and executive contracts. Simply put, Musk can pick up the phone and speak to all managers and members of the team.
However, this doesn’t necessarily mean Musk has the full support of other Twitter executives. However, with 80 million followers and a massive social media presence, he has the power to turn things in his direction. If he wants, he could change the platform to suit his specific needs as the largest stakeholder in the company.
Musk already has a few ideas to incorporate into Twitter, such as adding an edit button to the microblog and putting the platform neck-to-neck with Facebook.
3 Reasons Why Elon Musk Bought Twitter Stock
Elon Musk didn’t become the richest man in the world by sheer luck. He has made a series of strategic investments, including SpaceX, The Boring Company, PayPal, and DeepMind Technologies, to name a few. However, when it comes to Twitter, his reasons for investing in the company are not just business but also personal.
Here’s why Elon Musk bought Twitter stock:
1. Free Speech
In 2021, Donald Trump was kicked off Twitter following the insurrection. Musk has always advocated free speech on social media and aims to use his board seat to ensure Twitter remains a free platform to share ideas and views for everyone.
Moreover, has described himself as “half Democrat, half Republican” and and says “I’m somewhere in the middle, socially liberal and fiscally conservative”, but he received hundreds of calls and messages to restore the former president’s Twitter privileges following his stock purchase. However, the company’s executive body being [allegedly] extremely liberal confirmed that shareholders or the board do not determine policy decisions. More importantly, it confirmed it had no plans to reverse any policy decisions.
For politicians, celebrities, and business leaders, a platform is a key tool for sharing their views and messages across the digital realm. Since Musk’s focus has been on Twitter, he aims to influence how it functions and raise questions about its value.
2. Keys to a Major Promotional Platform
Musk is an avid Twitter user and knows how to take advantage of the platform to promote his ideas, products, companies, and acquisitions. Thus, he is almost always trending, not just as a CEO but also as a brand. Hence, Tesla and SpaceX have minimized the need for advertising, as a single tweet from Musk’s Twitter account gets weeks of news coverage.
Moreover, other brands, such as Hyundai, spent an astounding $2,000 in advertising per vehicle in 2019. In contrast, Tesla spent around 14 cents per vehicle in the same year. As of 2022, his following alone surpasses the following of most mainstream vehicle brands combined.
3. The Edit Button
As mentioned above, as soon as Elmo Musk officially became a part of Twitter’s executive board, he sent a provocative tweet on his account, creating a poll asking users if they’d like an edit button on the platform. As expected, his comment section was flooded instantly, mostly with yesses. The board understands that the consequences of this pall will matter in the future, so it advised users to vote carefully.
The problem is that equipping the platform with an edit button isn’t an easy task, according to Twitter’s co-founder, Jack Dorsey. He had always been against the idea and still hasn’t changed his mind, especially because the platform started as a text messaging service. Since text messages can’t be edited after being sent, some would say it’s pointless to add this feature.
Elon Musk Wants to Buy Twitter Just Weeks After Becoming Shareholder
Furthermore, on April 14, 2022, just after nearly two weeks following his stock purchase, Elon Musk made an offer to buy Twitter in a takeover attempt using the platform to announce his attention. The Twitter board said it would thoroughly review the proposal to determine the course of action it believes to be best for its success.
He offered $54.2 per share in the letter he provided, which is a 54% premium over his initial buy. He called this price his best and final offer. The world’s richest man also opened up about the proposal in the filing, saying he invested in Twitter due to its potential to be a platform for free speech worldwide. He believes that free speech is a societal imperative for an effective democracy.
Musk also clarified that his initial investment wouldn’t solve this societal imperative in its current form. It needs to be transformed into a private company, and he’s willing to pay $43.4 billion to make that happen.
In an interview on TED 2022, Musk emphasized that this move isn’t to make money. He believes that having a maximally trusted and broadly inclusive public platform is imperative for the future of the human race. He concluded by saying he didn’t care about the economics and had no problem retaining as many shareholders as possible.
Since Musk became a board member only recently, it is uncertain what other changes might unfold following this lucrative investment. Moreover, Musk is no stranger to drama, especially with his run-offs with the Securities and Exchange Commission in 2018 and tax issues.
Elon Musk knows that Twitter’s social and political worth far exceeds its stock price, with nearly 200 million daily users expressing their views on different topics. By gaining full control of the platform, he would be able to leverage its full power as a global communication and marketing tool.
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by Bobby J Davidson
I love our companies and we love what we do. For more information on the Davidson Family of Companies, visit www.bobbydavidson.com/about. Sign up for my Newsletter at the bottom of this page.