Twitter announced today that Tesla CEO Elon Musk will be joining its board of directors after he bought over 9% of the company and became its largest shareholder.
However, Musk’s board participation comes with a stipulation that he can’t own more than 14.9% of the company in order to avoid a hostile takeover.
Yesterday, an SEC filing revealed that Musk has been buying shares of Twitter and that his investment now surpasses $3 billion or about 9% of the company’s total outstanding shares.
It’s enough to make him the single largest shareholder, and he even has four times more shares than Twitter cofounder and former CEO Jack Dorsey.
Musk didn’t make his plan clear with this investment in Twitter, but as we noted yesterday, he is not known for making passive investments and we suspected that he would look to be involved.
Twitter is also the main social media that he personally uses, and he is widely popular on the platform with over 80 million followers.
Today, Twitter announced that Musk will be joining its board of directors:
The Board will appoint Mr. Musk to serve as a Class II director with a term expiring at the Company’s 2024 Annual Meeting of Stockholders as described in Item 1.01 of this Current Report on Form 8-K, subject to and contingent upon the provision by Mr. Musk of any information that the Company reasonably requires to complete its customary onboarding procedures (including a customary background check) for members of the Board.
Both Dorsey and Parag Agrawal, Twitter’s current CEO, welcomed Musk to the board this morning:
There has been fear that Musk would be looking to make a hostile takeover of Twitter, since in the weeks before making an investment in the company, he floated the idea of starting a new social media platform to compete with Twitter, which he sees as slipping away from free speech principles.
However, the board has taken a measure to prevent that.
As long as Musk is on the board, he is not allowed to own more than 14.9% of Twitter:
For so long as Mr. Musk is serving on the Board and for 90 days thereafter, Mr. Musk will not, either alone or as a member of a group, become the beneficial owner of more than 14.9% of the Company’s common stock outstanding at such time, including for these purposes economic exposure through derivative securities, swaps, or hedging transactions.
Musk has already started to gather input about potential changes to the social media platform, like asking if users want an edit button:
Twitter has already released an edit button that is available for a few seconds after sending a tweet for users of its premium subscription.
As we previously reported, Musk likely used cash from the sale of some of his Tesla stocks last year to invest in Twitter.
Previously, Musk has only been on the board of companies he started or led except for Endeavor Group, the holding company behind the UFC and the William Morris Agency, but he quit the board last year after a very short period of time on it.
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