Tesla chairman Elon Musk has promised “significant improvements” on Twitter after the social network on Tuesday announced plans to name him to the company’s board of directors.
The appointment, however, will potentially block the chances of a takeover bid by Musk, as with a seat on the board he cannot own more than 14.9% of Twitter’s shares, either as an individual shareholder or a member of a group.
The disclosure of Musk’s acquisition of a 9.2% stake on Twitter on Monday fueled widespread speculation about his intentions as the company’s biggest shareholder, which ranged from a full takeover of the platform to an active position.
“I’m excited to share that we’re nominating @elonmusk to our board,” Twitter Chief Executive Parag Agrawal said in a tweet.
In response, Musk responded, “I look forward to working with Parag and the Twitter board to make significant improvements to Twitter in the coming months.”
Musk did not provide details of his plans for the company, which is struggling to increase active users on its platform, even as it seeks new projects to end a long-standing stagnation.
“News that he is taking a board role will lead to expectations that he wants to be more involved in decision-making on the social network,” said Susannah Streeter, senior analyst at Hargreaves Lansdown.
Twitter shares were up 5.7% around 12:23 pm ET, after soaring more than 27% on Monday.
Musk could return to SEC radar after delay in disclosure
Did Elon Musk Break Capital Market Laws Again? Former US Securities and Exchange Commission (SEC) officials and academics said that Musk may have missed an important deadline to disclose, on Monday, the purchase of 9% of Twitter. The acquisition of the stake took place on March 14.
US securities law requires investors to disclose within ten days the acquisition of 5% of a company, which in Musk’s case would expire on March 24.
Late submission of this information could lead to a civil violation fine of up to $207,183, according to Urska Velikonja, a professor at the Georgetown University Law Center.
Financially, this is irrelevant to Musk, the world’s richest man with a net worth of $302 billion, according to Forbes. But the SEC could look into allegations of market manipulation and seek tougher sanctions in the investigation into Tesla’s stock sales, experts say.
“This is not a gray area. He bought it and didn’t give notice within 10 days. It’s a violation,” said Adam C. Pritchard, a law professor at the University of Michigan.
Musk also made comments about Twitter, after having bought a stake in the company, but without revealing the stake.
On March 25, Musk tweeted, “Free speech is essential for a functioning democracy. Do you believe that Twitter strictly adheres to this principle?”
The next day, Musk, a regular Twitter user, said he was “seriously thinking” about building a new social media platform.
“Musk is taking real risks,” Velikonja said. He’s playing games with SEC officials, saying, “‘Stop me if you can, but you can’t,” he said, adding, “I suspect the SEC will investigate whether you can be charged with manipulation.”
“Arguably, social media posts about possible alternatives to Twitter could be seen, in light of previously undisclosed participation, as a form of manipulation to affect the stock price, but proving this seems difficult,” said Howard Fischer, a former CEO. SEC advisor and partner at the law firm Moses & Singer.
Twitter shares soared after Musk bought a stake valued at about $2.4 billion on March 14, but that jumped to $3.7 billion by the last trading session.
What’s more, some timely trades on Twitter options days before Musk reveals his purchase are raising eyebrows among industry analysts.
The SEC is also investigating a tweet by Musk from November 2021 in which he asks his followers whether he should sell 10% of his stake in Tesla. The regulator reached an agreement in 2018 for Musk to get pre-approval on some of his tweets, after he said in a posting that he had secured a loan to take Tesla private. The SEC pointed to fraud against investors.
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