Now that Elon Musk is no longer joining Twitter’s board, it’s possible that the billionaire rabble-rouser is plotting to gain even more control over the social media platform and perhaps even mount a hostile takeover.
Musk’s endgame? He may be planning to buy enough of Twitter’s shares to reach a 50.1% stake, so that he would have controlling interest in the company. Not only would he be able to shape the platform’s direction, from specific features to its content moderation policies but the “Tesla Technoking” also stands to make a significant return on this investment. Getting to 50.1% can be done in a few ways.
“This is the worst nightmare for Twitter [that he’s] not taking the [board] seat,” Dan Ives, analyst at Wedbush Securities, told TheWrap. “This is a fork in the road for Twitter and its board. We believe this creates a hostile situation.”
Elon Musk Will Not Join Twitter Board
Aron Solomon, chief legal analyst for Esquire Digital, added: “The endgame is moving as we speak.”
Musk, already the richest person in the world after overtaking Amazon founder Jeff Bezos, has already benefited from the 9.2% stake in Twitter he’s accumulated since the start of the year. In addition to becoming the company’s largest shareholder, his stake has already increased in value by at least $800 million, to $3.68 billion in just a week.
By declining the board seat, Musk no longer has to agree to the conditions set by Twitter — including limiting his stake to 14.9% and accepting certain disciplinary actions if he were to defy the company’s code of conduct. According to analysts, Musk’s new independence could allow him to to force strategic change at the platform and potentially even push for a sale down the line as he buys up more shares of the company.
“It’s clear he has something very specific planned,” Iliya Rybchin, partner at Elixirr, said. “If he were to [become a board member], he would have certain fiduciary responsibilities that might limit his plans. It could be that he wants to take a larger interest in the company that would not be possible as a board member.”
It wouldn’t be the first time Musk took over a company. That’s exactly what he did with Tesla in 2004 — first by investing in the car company before eventually becoming chairman and then claiming the title co-founder and CEO.
In a tweet on Sunday, Twitter CEO Parag Agrawal said he believed Musk’s refusal of the board seat was “for the best.” He continued, “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.”
Agrawal may come to regret those words.
“With leadership not open to selling a controlling interest to Elon Musk, he would need to go directly to the shareholders,” Solomon said.
He could do this in one of two ways. First, he could make direct proposals to shareholders with a tender offer or, second, he could target individual shareholders with whom he might have relationships. Either way, his goal is at least 50.1% of the company shares to have the ability to stack the board or do “anything else necessary to prepare Twitter to execute his vision for the business,” Solomon said.
But there could be a formidable challenge for Musk if he plans a hostile takeover: He’s already in trouble with regulators after failing to file paperwork for purchasing more than 5% of his stake in Twitter this month. Going above that threshold requires disclosure with the Securities and Exchange Commission, and it’s unclear what the consequences of that will be and how it might affect future purchases of more Twitter shares.
Although Musk previously toyed with the idea of launching his own social network, these recent moves suggest that buying up an existing platform would be easier than starting one from scratch. Creating a new platform comes with many challenges in a saturated social media market, something even giants like Facebook and newcomers like Trump’s Truth Social are struggling to do.
“Musk is taking the top brand in social media,” Solomon said. “Twitter is already built. Money is no issue.”
As Musk seeks to increase his stake, Ives said Twitter’s board faces even more pressure to make strategic changes. And ultimately, bigger changes could mean partnering with private equity or some form of a coalition between Musk and private equity that could lead to a future sale of Twitter.
Twitter’s changes in leadership and lack of innovation have left it open to takeover by someone like Musk, Solomon suggested. Agrawal took over after founder and CEO Jack Dorsey exited last year, and the platform has struggled with product development as it aims for 315 million daily users and more than $7.5 billion in revenue in 2023.
“This is Twitter’s own fault,” Solomon said. “Jack Dorsey didn’t do a good enough job as CEO.”
Musk’s still-unfolding plans could end up being an overall “net positive” for Twitter, Rybchin said. A serial entrepreneur like Musk, who’s focused on innovation, might inspire greater confidence than its current leader — which could be what Twitter needs to push it to the next level.
“Despite some of his erratic behaviors, I have higher confidence in Elon Musk’s vision for Twitter than Parag Agrawal’s,” Rybchin told TheWrap. “The electric vehicle and autonomous driving, solar roof and private space exploration industries would likely have ceased to exist had it not been for Elon Musk.”
Solomon agreed. “Musk could ultimately be very good for the company,” he said. “He cares about making each share more valuable than it is today. He loves attention.”