Days following the announcement that Elon Musk would be joining Twitter’s board of directors, the billionaire entrepreneur reversed course to decide against joining the board, which would have hamstrung his ability to own more than 14.9% of company stock.
Twitter CEO Parag Agrawal announced over the weekend that “Elon Musk has decided not to join our board.”
“The board and I had many discussions about Elon joining the board, and with Elon directly,” Agrawal stated on Twitter. “We were excited to collaborate and clear about the risks. We also believed that having Elon as a fiduciary of the company where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward. The board offered him a seat.”
“We announced on Tuesday that Elon would be appointed to the board contingent on a background check and formal acceptance,” Agrawal continued. “Elon’s appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best. We have and will always value input from our shareholders whether they are on our board or not. Elon is our biggest shareholder and we will remain open to his input.”
“There will be distractions ahead, but our goals and priorities remain unchanged,” the statement concluded. “The decisions we make and how we execute is in our hands, no one else’s. Let’s tune out the noise, and stay focused on the work and what we’re building.”
After becoming Twitter’s top shareholder with control over more than 9% of company stock, Musk signed an agreement with the social media platform agreeing that if he served on the board of directors for 90 days afterward, Musk would not be able to own more than 14.9% of Twitter’s common stock.
Because Musk is not joining the board, he is no longer bound by any of the restrictions he agreed to.
Musk’s decision not to join the board means that the entrepreneur is not restricted to the amount of the company he can buy, which may signal his desire to perform a hostile takeover of Twitter.
Musk’s reversal of his decision opens the door to a hostile takeover, financial analysts say.
“This now goes from a Cinderella story with Musk joining the Twitter board to likely a Game of Thrones battle between Musk and Twitter,” said Dan Ives, the prominent Wedbush analyst who called Musk’s first purchase “just the appetizer” of things to come.
As noted by Forbes, Musk has spoken publicly about his concerns with Twitter, questioning everything from its basic revenue model to the company culture.
The New York Post reported:
Ives outlined three potential scenarios for Musk’s involvement with Twitter in the near future – suggesting he could partner with an activist investment firm to pressure the company; agitate for an overhaul himself through public calls for changes to the platform; or simply decide the investment is not worth the trouble and sell off his shares.
“In our opinion its likely paths 1 or 2 with the Street now focused on Musk’s next poker (next filing/stake in Twitter) move in this ongoing soap opera between Elon and Twitter,” Ives added.
Chester Spatt, a finance professor at Carnegie Mellon University and former chief economist at the U.S. Securities and Exchange Commission told the Philadelphia Inquirer that Musk’s role on the board could have made him a “thorn in the side of management,” but would have discouraged him from shaking things up too much.
“There’s an old cliché about keeping somebody inside the tent,” Spatt said. “There were advantages to having him constrained a bit.”